What You Need to Know About RefiNow™: A Low-Income Refinance Option

Even a small drop in your interest rate can lead to significant savings over the life of your loan, potentially amounting to thousands of dollars. However, while refinancing your mortgage can significantly reduce the cost, the fees and strict requirements often make it unappealing, especially for lower-income homeowners.

That’s where RefiNow™ comes in. Launched in 2021, this program was designed specifically to make refinancing more affordable and accessible for homeowners who might otherwise be excluded from traditional options.

First Residential does not currently offer the RefiNow™ loan program. Get started here to learn about your available options.

Pros of RefiNow™

Using RefiNow™ to refinance your home loan has several benefits. The pros of using this type of refinance loan include:

A Lower Interest Rate

One of the main benefits of RefiNow™ is that it guarantees meaningful savings for homeowners. To qualify, the new loan must reduce your interest rate by at least 0.5% compared to your current loan. In other words, if your current rate is 4%, your new rate must be 3.5% or lower. 

Many borrowers may be able to reduce their rate even further, but the program ensures that everyone who qualifies sees a real, noticeable drop.

Reduced Monthly Payments

The RefiNow™ reduced interest rate requirement guarantees a reduction in monthly mortgage payments for eligible borrowers. In some cases, the savings may translate to thousands of dollars each year.

For a typical borrower, even a 0.5% to 1% drop in interest rate can reduce monthly mortgage payments by $100 to $250, depending on the size of the loan. Over a year, that adds up to about $1,200 to $3,000 in savings.

Savings on Upfront Closing Costs

Another benefit of the RefiNow™ program is that Fannie Mae offers a $500 credit on loans that require an appraisal. This credit is provided as a lender credit (LLPA) that must be passed directly to the borrower. In some cases, an appraisal waiver may eliminate the need for an appraisal entirely.

One issue with refinancing is upfront fees and costs. This reimbursement helps borrowers save on appraisal costs, making it more affordable for low-income homeowners to refinance their home loans.

Potential Cons of RefiNow™

While the RefiNow™ program can be a valuable refinance option for low-income homeowners, it also has a few potential downsides. These include:

Strict Interest Rate Limitations

The RefiNow™ program comes with strict interest rate reduction limitations that can be limiting for some homeowners. As noted, RefiNow™ requires that the loan must lower the homeowner’s interest rate by at least 0.5% to qualify. Unfortunately, many homeowners’ current loan interest rates are within 0.5% of the prevailing market rate, meaning they won’t be eligible to refinance with the RefiNow™ program. As such, while the 0.5% reduction requirement can lead to big savings for many homeowners, it can also limit the number of homeowners who could qualify.

Strict Income Limitations

The RefiNow™ program also has strict income requirements, further limiting the number of homeowners who qualify. Homeowners who want to take advantage of RefiNow™ must have an income under 100% of the area’s median income.

Because median income levels vary by location, some homeowners in lower-income areas may find it harder to qualify.

Only Fannie Mae Loans Qualify

The only loans that qualify for the RefiNow™ program are Fannie Mae-backed or secured loans. Homeowners with Freddie Mac-backed loans do not qualify for this program, so the program is quite limited in terms of who can qualify for refinancing.

That said, a similar refinancing program is available for Freddie Mac loan holders. This program, known as Refi Possible®, is also available to low- to moderate-income borrowers.

One-time Use Limitation

RefiNow™ can be used only once per borrower/loan, so homeowners should carefully consider the timing before applying.

RefiNow™ vs. Refi Possible®

A similar refinancing option, backed by Freddie Mac, called Refi Possible®, offers many of the same benefits as RefiNow™. Here’s how the two programs differ:

• Loan type: RefiNow™ is for homeowners with a Fannie Mae–backed loan, while Refi Possible® is for those with a Freddie Mac–backed loan.

• Underwriting system: Each program runs through its respective agency’s system, so the underwriting process may slightly differ depending on whether Fannie Mae or Freddie Mac backs your loan.

In short, both programs are designed to accomplish the same goal, helping lower-income households access refinancing savings, but the program you qualify for depends entirely on whether Fannie Mae or Freddie Mac backs your mortgage.

RefiNow™ vs. Other Refinance Options

RefiNow™ makes it easier and less expensive for lower-income homeowners to take advantage of low-interest rates. Waiving the upfront costs of refinancing can make it more affordable and accessible for homeowners who may not otherwise qualify.

Here’s how RefiNow™ compares to other types of refinancing:

RefiNow™ Eligibility

While the RefiNow™ refinance program is a unique and guaranteed way to help save money on mortgage loans, to qualify, homeowners must meet the following requirements:

Have a Fannie Mae–Backed Mortgage on Your Primary Residence

Your loan must be owned or guaranteed by Fannie Mae, a government-sponsored enterprise that buys mortgages from lenders. Most people don’t automatically know if their loan is Fannie Mae–backed, but you can check for free using the Fannie Mae Loan Lookup Tool.

Meet Income Requirements

Your household income must be at or below 100% of the area’s median income (AMI). This means your income should be in line with, or lower than, the average income for your county or metro area. You can look up AMI by property address using Fannie Mae’s AMI map tool.

Have a Solid Recent Payment History

You can’t have missed any mortgage payments in the last six months, and no more than one missed payment in the last 12 months. This shows lenders that you’ve been keeping up with your loan and are prepared for refinancing.

Loan-to-Value (LTV) Ratio of 97% or Less

Your loan balance can’t be almost equal to your home’s value. In other words, you need to have at least a small amount of equity in your home. Basically, you can’t owe more than 97% of your home’s worth.

For example, say your home is worth $300,000, the maximum loan amount you could qualify for would be $291,000 (97% of the home’s value). That means you’d need at least $9,000 in equity to meet the 97% LTV requirement.

Debt-to-Income (DTI) Ratio of 65% or Less

Your debt-to-income ratio compares the amount of debt you have (including your mortgage, car loans, credit cards, etc.) to your monthly income. Many programs limit debt-to-income ratios to 43–50%, but RefiNow™ allows up to 65%, which gives more homeowners a better chance to qualify.

Loan Must Be at Least 12 Months Old

Your mortgage must be seasoned, meaning you’ve had it for at least a year, before you can refinance through RefiNow™.

Same Borrowers on the New Loan

The people listed on the refinance must be the same as those on your current mortgage. The only exceptions are major life events, like the death of a borrower.