4 Tips to Federal Refinancing of Home Loans

Before you decide if federal refinancing is appropriate for your federal home loan, there are some additional considerations to take into account that are not typical of a conventional loan refinance. A refinance through the Home Affordable Refinance program gives homeowners a reduced interest rate, a reduced repayment term, and the option to replace an interest only or adjustable rate mortgage with a fixed rate loan. With the overwhelming volume some lenders are experiencing with processing refinance applications, consider these 4 tips that will help make the process smoother.

1. Research if you are Eligible for the Home Affordable Refinance Program

To qualify for the Home Affordable Refinance program, you must have a federal loan from either Fannie Mae or Freddie Mac. There are websites that that allow you to lookup your loan and determine if it was guaranteed by either Fannie Mae or Freddie Mac. Unlike the Home Affordable Modification Program, you must be current on your monthly mortgage payments. You can be no more than 30 days late within the past 12 months to be eligible for a federal refinance. Also, your first mortgage must be less than or equal to 125 percent of the current market value of your home. Owner occupying one to four unit properties, vacation homes, or a one to four unit investment properties are eligible for the Home Affordable Refinance Program.

2. Gather Your Documents 


Before you contact the prospective lender to refinance your home loan, obtain a copy of your credit report. It is important to ensure that all the information on the credit report is accurate and will assist in getting approved for your refinance. The lender will ask you to submit the following:

• Documentation of monthly gross income for loan holders
• Current tax return
• Documentation of any second liens
• Documentation of all credit card debt and monthly payments
• Documentation of all other debts and monthly payments

You can obtain the Home Affordable Refinance application that will need to be submitted, along with all your documentation, from the lender you plan refinancing with.

3. Contact Multiple Lenders

The general rule of thumb when considering to refinance a home loan is when the current interest rate is 1 percent lower than the interest rate that is currently paid on a mortgage. However, the Home Affordable Refinance program is for homeowners who cannot obtain a traditional refinance since the lender will not refinance a mortgage that is more than the market value of a home. Although the Home Affordable Program gives borrowers in this situation the opportunity to refinance, the interest rate is still subject to the lender’s discretion. Contact more than one lender to compare the interest rates that they will be charging with your federal refinance.

4. Determine if You’ll Benefit from the Home Affordable Refinance Program


Once you have applied for your loan, the lender will supply you with a good faith estimate. This document will outline the new terms, interest rates, and mortgage payment of the loan. Compare this with your current loan terms and conditions to determine if the federal refinance offers long term affordability. 

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