Fannie Mae has new rules that could help you catch up on your mortgage payments.
It is important to note the difference between restructuring and refinancing to understand what the updated policy means for you.
Loan restructuring, also known as loan modification changes the terms of the original mortgage. This could be a change in the principal loan amount following forgiveness, change in the loan term from 360 to 480 months and make lower monthly payments, or change from adjustable-rate to fixed-rate mortgage. After restructuring, you still have the same original loan.
On the other hand, loan refinancing is taking out a new loan to pay off the original mortgage. After refinancing, you have a totally new loan.
The Updated Rule on Restructured Loans
Before Fannie Mae updated its policy on restructured loans and qualifying for a new loan, a borrower must make 24 monthly payments (or 12 months if trying to finance a separate property) prior to refinancing their mortgage.
Now, if you have previously reconstructed your conventional mortgage loan, there is no minimum number of monthly payments you have to meet in order to pre-qualify for refinancing.
However, other requirements still apply such as down payment, debt-to-income ratio and credit score. Take note that this policy update only applies to conventional loans at the moment. Other mortgage loans like FHA loans and jumbo loans are yet to follow suit.
How This Updated Rule Can Help You with Your Mortgage
Since you will not have to be tied down to your existing reconstructed mortgage loan, you can grab this opportunity to refinance.
Brexit has brought mortgage interest rates to historic lows and lenders are expecting refinance applications because of this.
Talk to a Lender Now
If you are unsure of how this affects you, talk to a lender. Click on the link below and we will match you to a lender that can answer your questions and lead you to saving on your mortgage payments.
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.
