Are you frustrated with your current mortgage? Perhaps you’re paying a high-interest rate and are struggling to stay afloat.
Consider the HIRO mortgage program to obtain relief. HIRO stands for High LTV Refinance Option. It allows homeowners to refinance out of an existing mortgage and benefit from a lower interest rate.
Many homeowners are unable to refinance due to low equity. HIRO gives low-equity homeowners the chance to refinance. Before learning about the qualifications, you must determine if you have the proper LTV ratio.
This article will highlight the LTV minimums and maximums in more detail. Let’s explore.
Minimum LTV
The minimum LTV depends on what type of loan you have. The minimum structure breaks down as follows:
- Primary Residence (1 to 4 units): 97.01% or higher.
- Second Home (1 unit): 90.01% or higher
- Investment Property (1 to 4 units): 75.01% or higher
Let’s say you own a single-family residence and have a $260,000 loan balance. However, the property value is $300,000. Therefore, the LTV is 86%, which means you don’t qualify.
Conversely, let’s say the mortgage is $295,000 on a $300,000 mortgage. The LTV is 98.3%, meaning you’re eligible for the program.
With that, you must meet additional qualifications. First, your loan must be under Fannie Mae. Second, beneficiaries of the HARP loan program don’t qualify.
Moreover, you must have a clean payment history. For instance, you cannot have late payments over 30 days late in the past six months.
Plus, you can only make one payment that was over 30 days late in the past 12 months. Overall, you cannot have a delinquency that’s more than 30 days late.
Further, you must be at least 15 months removed from the loan’s start date.
- Example: If the loan origination date is October 1, 2020, your eligibility date is January 1, 2020.
Above all, you must benefit from the refinance plan in some capacity. The benefit could be a reduced monthly payment or a lower interest rate.
You may also shorten your amortization schedule. You could even swap an adjustable mortgage for a fixed one.
Maximum LTV
If you have a fixed-rate mortgage on a 15 or 30-year term, there’s no maximum LTV. You could have an LTV as high as 150% and still qualify for the program. If you have an adjustable-rate mortgage, the LTV max is 105% of the property value.
The HIRO program is for people whose property cannot generate enough equity. If you have more than 105% of the property value, you still have options.
Credit Score Concerns
Many applicants fear a credit check. Others may worry about a credit pull. However, HIRO doesn’t compel lenders to scrutinize credit scores. This is because they’re financing a property in situations where the borrower already has a stable financial history.
- Note: Even though Fannie Mae doesn’t have a minimum credit score, lenders could still impose credit thresholds during the process. Therefore, check with your lender about credit standards.
Additionally, lenders generally aren’t concerned about your credit background because you have a good history of making payments.
Debt-to-Income Ratio Concerns
Lenders also don’t concern themselves with DTIs due to your good payment history. Plus, borrowers may get a lower monthly payment, reducing their monthly debt burden.
Some lenders may prioritize DTI more than others. Therefore, ask about DTI requirements. Further, lenders could check your DTI if your payment increases by more than 20%.
DTI may also become a priority if you remove a borrower from the loan. In other cases, the borrower may go through the Alternative Qualification Path. This option allows lenders to reassess your qualifications if the loan structure changes significantly.
Regarding income, you must provide at least one of the following:
- Verbal confirmation of W-2 or self-employment income (At least one borrower must meet this requirement)
- Non-employment income documentation (i.e. pension)
- Documentation of reserves equaling at least 12 months of the new housing payment (including insurance and taxes)
Also, you generally don’t need to provide bank statements. In limited cases, bank statements are necessary if you remove a borrower or have a monthly payment increase of over 20%.
Applicants who remove co-borrowers must adhere to the following criteria:
- A maximum DTI ratio of 45%
- A minimum 620 credit score
- A document that substantiates income
HIRO Loan Benefits
This program allows applicants to refinance out of mortgages that could lead to default. It acts as a mortgage stimulus for the middle class.
Also, it will help homeowners struggling to make payments due to the economic fallout of the pandemic. Additionally, it’s one of the few major mortgage relief programs that give homeowners a lifeline. If they’re struggling financially, they can refinance into a low-rate mortgage or get a lower monthly payment.
Further, a fixed interest rate can help struggling homeowners. Since borrowers can switch from an adjustable-rate mortgage to a fixed one, they can pay a low rate until the loan ends.
HIRO is also flexible when it comes to mortgage insurance. If you have mortgage insurance, the new loan will include your existing insurance policy. If you weren’t required to obtain insurance, you don’t need insurance under the new loan.
Is the HIRO Mortgage Program Worth It?
The HIRO Mortgage program is worth it if you don’t have enough equity in your home. Plus, it’s a great option if you want a lower monthly payment or interest rate. Under this program, you can also change what type of mortgage you have.
Overall, it’s a mortgage stimulus program designed to help struggling families. The main problem is that HIRO is only available to Fannie Mae borrowers.
Do you want to know when you should apply for the HIRO program? Contact us today to find out.
We 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.