Low-income borrowers could potentially save an average of $100 to $250 a month under a new FHFA program

Low-income borrowers could potentially save an average of $100 to $250 a month in mortgage payments under a new government refinancing initiative starting June 5.While higher-income borrowers rushed to refinance their mortgages last year by taking advantage of the historically low mortgage interest rates, more than two million low-income families did not do so, according to the Federal Housing Finance Agency.In April, the FHFA directed Fannie Mae and Freddie Mac, two government-sponsored mortgage finance agencies, to roll out a new refinance option aimed targeting low-income borrowers with single-family mortgages backed by the agencies.Hot real estate: Home prices rose by more than 50% in these 10 markets since 2017One roof, many generations: Multi-generational home sales increase during COVID-19 pandemic as buyers care for parentsIs refinancing your home a good idea?“Many homeowners in low-income brackets may believe they can’t afford to refinance, be convinced they won’t qualify or be unaware of the potential monthly savings,” said Katrina Jones, vice president of Racial Equity Strategy & Impact at Fannie Mae.“They may be surprised to learn they have options to make their monthly housing payments more affordable, and they can begin by contacting any mortgage lender of their choice to explore refinancing now,” she said.Monthly mortgage savings of up to $250RefiNow, makes it easier for eligible homeowners earning at or below 80% area median income to refinance at a lower interest rate and reduce their monthly mortgage payment. According to the FHFA, eligible families on average would see monthly savings between $100 and $250.The option requires lenders to provide a meaningful benefit from refinancing by ensuring a minimum of a 50-basis-points reduction in their interest rate and savings of at least $50 in their monthly mortgage payment. What about refinancing fees?In addition, borrowers will receive a maximum $500 credit from the lender if an appraisal is required.  For loans with low-income borrowers and loan balances at or below $300,000,  Freddie Mac and Fannie Mae will waive the 50 basis points up-front refinance market fee that they otherwise charge lenders.Despite the sizable potential cost savings, more than one-third of 2018 homebuyers said they did not shop around before selecting their mortgage lender, according to a 2018 National Housing Survey.Tips for refinancingHomeowners can find out if the current loan on their home is owned by Fannie Mae using the Loan Lookup tool, and learn more about refinancing options at Fannie Mae’s website KnowYourOptions.com.Experts suggest reaching out to several mortgage lenders to discuss refinance options and to relentlessly shop around.“The (range) of interest rates across lenders is a very real problem in this industry,” said Patrick Boyaggi, the CEO of Own Up, a technology company that helps people save on mortgages through a group of regional lenders.A 2020 study by Own Up on loans for veterans found that the rate differences between loans offered by the top 20 VA lenders in the country was more than 1%.  “People don’t recognize it, but it could be the difference of $20,000 or $50,000 over the life of the loan in interest,” Boyaggi said. “Even a quarter percent can have a really profound impact on your personal balance sheet.”To qualify for RefiNow, homeowners must have:• A Fannie Mae-backed mortgage secured by a 1-unit, principal residence.• A current income at or below 80% of the area median income (not the income at the time they got the original mortgage).• Not missed a mortgage payment in the past six months, and no more than one missed mortgage payment in the past 12 months.• A mortgage with a loan-to-value ratio (a number lenders use to determine how much risk they’re taking on with a secured loan) up to 97%, a debt-to-income ratio (compares how much you owe each month to how much you earn) of 65% or less, and a minimum 620 FICO (credit) score.Swapna Venugopal Ramaswamy is the housing and economy reporter for USA TODAY. Follow her on Twitter @SwapnaVenugopal


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