Do you have an upside-down mortgage? Do you feel stuck and do not know what to do?
If you are a Fannie Mae borrower, consider the HIRO loan program. It allows applicants to refinance if they owe more than the house is worth.
The program has attractive features in the form of no credit standards or no debt-to-income (DTI) thresholds. There’s also no maximum LTV on the loan.
This article will reveal if HIRO is the right option for you. Let’s explore.
What Does the HIRO Program Offer?
A HIRO loan provides you with a lower balance and a lower monthly payment. You will also benefit from a shorter amortization period.
If you have an adjustable-rate mortgage, you can switch to a fixed one. Plus, you can transfer your mortgage insurance to the new balance. You can also change the mortgage classification.
- Example: If you have an investment property, borrowers can change the mortgage into an owner-occupied mortgage.
The program is also friendly to people with past foreclosures, defaults, and bankruptcies. If you have a spotty financial history, you do not have to undergo a waiting period before qualifying for the program.
How Do I Know If the HIRO Mortgage Program Is Right for Me?
To know for certain, subtract how much you owe from the current property value. To know the property value, talk to a home appraiser or a real estate agent. However, an appraiser will give you a more accurate figure.
Moreover, check housing prices in your area. If housing prices have plummeted, you may be underwater and not know it. The program is also ideal if your area has undergone consistent housing depreciation.
There are some parts of the nation that have suffered a continuous housing dip despite the mass appreciation across the nation. HIRO is a good program if your local housing market will continue to suffer in the long-term.
Additionally, consider the HIRO program if you have scant equity or no equity at all.
Many homeowners think they can refinance with little to no equity if they have good credit and stable income. To refinance, applicants must have sufficient equity to qualify.
Do I Qualify for the HIRO Program?
First, you need a loan under Fannie Mae. Further, you must have an interim window of 15 months between the loan origination date and the refinancing date. The mortgage origination date must also take place on or after October 1st, 2017.
You must also remain current on your mortgage payments. The program does not allow late payments that are 30 days late or more in the past six months.
You also cannot have more than one 30-day late payment in the past year. Overall, your account must have no past due amount that is over 30 days late.
Further, the program requires another verification of your income. With that, the program will accept the following incomes:
- Current employment verification
- Self-employment income
- Social security income
- Pension income
- Liquid reserves that match a full year of the new house payment
Despite the restrictions, the program has some flexibility. For instance, lenders generally do not emphasize your credit score because your property and financial history are sufficient. However, other lenders may assess your credit score alongside other factors.
Moreover, lenders do not have DTI requirements. Lenders believe a refinanced loan will negate DTI concerns. In some cases, lenders would look at your DTI if you removed a co-borrower from the loan, or if your new payments expanded more than 20%.
What About LTV Requirements?
This program has no maximum LTV mandate, which is the most attractive feature of this mortgage relief program. This rule applies to 15-year mortgages and 30-year mortgages.
It is a great option for homeowners with a high LTV of over 100%. For adjustable-rate mortgages, they have a max LTV of 105%.
However, there are also minimum LTVs. You may not qualify if your equity is too high.
The following LTV minimums apply to primary residences:
- Single Unit: 97.01%
- Two Units: 85.01%
- Three or Four Units: 75.01%
If you refinance a single-family home, for example, the minimum LTV will be 97.01%. You can also include vacation homes and investment properties.
For vacation homes, a single unit must have an LTV minimum of 90.01%. For investment properties between one to four units, the LTV cap is 75.01%.
What About Appraisal Requirements?
An appraisal requirement depends on the property. Fannie Mae may exempt your property from an appraisal in some cases. You will know if an appraisal is necessary when you apply.
Regardless, you do not need to worry about the appraised value because there is no maximum LTV. As a result, applicants do not have to concern themselves with low appraisals.
Do I Have to Worry About Borrowing Limits?
Fannie Mae applies a conforming loan limit to the property. The conforming loan limit is a cap Fannie Mae places on the guarantee. Your borrowing limit depends on the number of units and the cost of housing.
- Example: The cost of a single-family home in a high-value area can range from $500,000 to $700,000. Therefore, Fannie Mae will increase the limit accordingly.
If you have a four-unit property, the limit could range from $900,000 to $1.4 million.
What About the Cons of a HIRO Loan?
The most notable con is that the HIRO loan program is only available to Fannie Mae borrowers. Additionally, all applicants must remain current on the mortgage. Overall, the pros outweigh the cons.
You do not need a high credit score to receive approval. You also do not have to contend with a maximum LTV. Best of all, all property types qualify.
Interested in learning more about a HIRO mortgage? Click here to get more information.
We at 7th Level Mortgage are an experienced team of mortgage professionals based out of New Jersey and serving the east coast from Pennsylvania to Florida including Delaware and Maryland. We have won numerous awards for our excellent professional work and reputation with clients for being extremely diligent, accessible, and hands-on throughout the entire mortgage process.