How to Refinance a Mortgage Through Freddie Mac
Refinancing your mortgage with Freddie Mac requires applying with a lender that offers mortgage loans from Freddie Mac, which is the nation's second-largest government sponsored mortgage servicer. Freddie Mac only accepts loans from approved lending institutions. Borrowers cannot apply directly with Freddie Mac for financing, even if your current loan is a Freddie Mac-owned loan. If Freddie Mac currently owns the mortgage on your home, special financing programs are available.
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Things You'll Need
- List of lenders (3-5)
- Specifics of your current loan (the note will have your initial loan amount and interest rate)
- Reasonable idea of the value of the home
Instructions
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Before you contact a lender, know the reasonable approximate value of your home. This information helps lenders know what loan programs to offer. Freddie Mac offers many different programs, and most lenders have access to those programs. Knowing the realistic Loan-to-Value (LTV) enables the broker to provide accurate quotes for your situation. The LTV is the percentage of your loan amount compared to the value of the home. So, a $90,000 loan on a $100,000 home equals 90 percent LTV.
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Contact lenders and ask for quotes. Lenders will request permission to pull credit. Do not allow this. You will have to give the lender a realistic idea of your credit profile. If you overstate your credit profile, the quote may not be accurate. If you authorize each lender to pull your credit, this can have a negative effect on your credit score. Wait until you have chosen a lender to authorize this. Be sure to request quotes on Freddie Mac programs, as they may not be the lender's first choice.
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If Freddie Mac currently owns your loan, you may qualify for two special programs. Freddie Mac's relief refinance program offer LTVs much higher than traditional loan programs. Freddie Mac designed these programs for borrowers whose houses have declined in value. If you have experienced decline in value, and Freddie Mac owns your loan, contact your current lender. You may qualify for a simplified type of refinance that requires much less paperwork and much easier qualifying standards than typical refinances do. They also can go up to 125% LTV, so you can actually borrow more than the home's worth if needed.
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If Freddie Mac does not own your mortgage, ensure your broker is using Freddie Mac's Loan Prospector system. Freddie Mac offers Loan Prospector to lenders as an automated underwriting system. Once you have fully applied and authorized a credit report to be pulled, the lender runs the details of the loan through Loan Prospector. This ensures your loan meets Freddie Mac's guidelines and will be sold to Freddie Mac.
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If Freddie Mac does not own your mortgage and you desire to have them own your mortgage, ensure your broker using Freddie Mac's Loan Prospector system. Freddie Mac offers Loan Prospector to lenders as an automated underwriting system. Once you sign the application and authorize pulling of your credit report, the lender runs the details of the loan through Loan Prospector, this ensures your loan meets Freddie Mac's guidelines and before being sold to Freddie Mac. There isn't much for you to do other than request this from your broker at application.
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Tips & Warnings
Whenever obtaining new financing, resist the urge to use credit during the process. Credit scores are fickle and using your credit cards too much, buying a new car, or obtaining other new lines of credit can lower them. Do not close any lines of credit either; this can also lower the credit scores, particularly if you had the credit for more than 24 months. Lenders will pull credit just before they close sometimes, and if the credit scores change, it could cause a decline of the mortgage.
Make your monthly payments. Sometimes lenders will tell you to skip that month's payment because the loan will be paid off at closing. Delays happen, and if the new loan cannot close until the following month, you now have a late payment on your credit report. and this could cause a decline of the loan.
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