Are you looking to refinance your mortgage to take advantage of today’s low rates, but do not have a lot of equity in your home and are not eligible for HARP®? The Freddie Mac Home Advantage Refinance could be a good option for you. This loan offers the same advantages of HARP® for those homeowners that purchased their home after May of 2009, which would render you ineligible for a HARP® refinance. The main reason people use this loan is to lower their payment by refinancing into today’s lower rates.
How do you Qualify?
Qualifying for the Freddie Mac Home Possible Advantage Refinance is simple. Your property must be owner occupied, which means you must live there. This is the largest difference between the Freddie Mac program and HARP®. With HARP®, you can refinance a primary, secondary, or investment property, making it easier for everyone to refinance their home. The Freddie Mac program only works on primary properties, but is a great tool to save money on the home you live in, making it easier to afford investment properties or second homes.
The difference with the Freddie Mac 97% LTV refinance and the Fannie Mae 97% refinance is the amount of income that is allowed. For Freddie Mac there are maximum amounts allowed. In general, you cannot make more than 100% of the average income in your area. Freddie Mac offers a guideline of the average income in every area, making it easy to determine if you would qualify. If you make more than the allowed amount, the Fannie Mae program may be a better choice for you.
Another difference between the Freddie Mac and Fannie Programs is that Freddie Mac does not require that the loan be backed by Freddie Mac in order for you to refinance. It can be a non-Fannie or Freddie loan and still be eligible, which is great for those that did not get a conventional loan because they did not qualify but will qualify now. The exception to this rule is that FHA, VA, HUD, and HARP® loans are not applicable.
Who Benefits from the Freddie Mac Home Possible Advantage Refinance?
There are many people that will benefit from this type of loan. The most common are those that do not qualify for HARP® because of the date that they purchased their home. It is also a good choice for those that may have a higher than normal debt-to-income ratio because Freddie Mac offers more lenient guidelines for the debt-to-income ratio. In general, there is no maximum for the front-end ratio, which is the mortgage payment, including the taxes and insurance when compared to your income. The back-end ratio, which is your total debt including the mortgage and other monthly obligations, is also a little more lenient, but if manual underwriting is required, the hard requirement is 43% maximum debt-ratio.
If you are thinking about refinancing yet will not qualify for HARP®, the Freddie Mac Home Possible Advantage Refinance can be a great choice. It offers you plenty of flexibility, while making it possible to lower your rate. You will have to pay private mortgage insurance, but if you are still saving money in the long run, it can be worth it. You are eligible to cancel the PMI once your loan-to-value reaches below 80% and upon your request. If you do not request it, the PMI will automatically cancel once you hit 78% LTV. This is a great way to save yourself money every month, making it easier to get your loan paid down and to avoid defaulting on your loan, putting you at risk for foreclosure.