Borrowers looking to refinance have a cause for celebration as Freddie Mac (Federal Home Loan Mortgage Corporation) has acted on advice from the Federal Housing Finance Agency by eliminating a long-standing minimum credit score requirement of 620.
While borrowers seeking to take advantage of the Freddie Mac decision must possess at least 20% worth of equity within their home, it’s still a welcome reprieve for many facing desperate financial situations.
Fannie Mae is also following suit, axing a refinancing requirement where lenders must ascertain a borrowers capacity to pay back. It stands to benefit many underwater borrowers (individuals owing more on their loan than the current worth of their residence) looking to stay current on their mortgages.
With 4 million loans facilitated by Fannie Mae and Freddie Mac presently underwater, the slackening of refinancing requirements is aimed to increase refinancing so a greater range of borrowers can take benefit from mortgage rates presently sitting at record-low levels.
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