What Is Refi Possible and Who Qualifies
Refi Possible targets borrowers who might struggle to qualify for conventional refinancing due to income constraints. The program allows you to refinance your existing mortgage without taking cash out, focusing purely on improving your loan terms.
The "low-income" qualification typically means your household income falls at or below area median income limits, though specific thresholds vary by location. Your lender will verify your income against these local benchmarks during the application process.
Say you bought your home three years ago with a 30-year mortgage at 6.5% interest. Today's rates dropped to 4.5%, but your income hasn't grown much since purchase. Refi Possible could help you secure that lower rate even if you wouldn't qualify for a standard refinance program.
Income Requirements and Documentation
Your current income must meet Fannie Mae's low-income thresholds for your area. These limits change annually and vary significantly by county and metropolitan area.
The lender will require standard income documentation: recent pay stubs, W-2 forms from the past two years, and tax returns. If you're self-employed, expect to provide profit and loss statements and additional business documentation.
Your income must be stable and verifiable through the same methods used for purchase loans. Commission income, bonuses, and overtime require a two-year history to be counted toward qualifying income [[B3-3.1-01]].
The No-Cash-Out Restriction
Refi Possible strictly prohibits taking cash out beyond what's needed to complete the transaction. You can roll closing costs into the new loan amount, but you cannot access your home's equity for other purposes.
Acceptable costs include lender fees, title insurance, appraisal fees, and prepaid items like property taxes and homeowners insurance. You might also pay off small liens or judgments if required for the refinance.
The new loan amount cannot exceed your current principal balance plus these allowable costs. If your home has appreciated significantly, you cannot tap into that equity through Refi Possible.
Current Mortgage Payment History
Your existing mortgage must demonstrate responsible payment behavior. Fannie Mae requires no late payments in the 12 months leading up to your application.
This payment history requirement applies to your current first mortgage. If you have a second mortgage or home equity line of credit, those payment histories matter too, but the primary focus remains on your first mortgage performance.
A single 30-day late payment in the past year could disqualify you from Refi Possible. However, if you can document that the late payment resulted from a temporary hardship that has been resolved, your lender might still consider your application.
Tangible Benefit Requirements
The refinance must provide you with a meaningful improvement to your mortgage terms. This typically means one of several outcomes: a lower monthly payment, a shorter loan term, or conversion from an adjustable-rate to a fixed-rate mortgage.
For rate-and-term refinances, the new interest rate usually needs to be at least 0.5% lower than your current rate. If you're shortening your loan term, the payment increase must be reasonable relative to your income.
Say your current mortgage has 25 years remaining at 5.5% interest. Refinancing to a 15-year loan at 4.0% might increase your monthly payment by $300, but you'd save significant interest over the loan's life. This could qualify as a tangible benefit.
Property and Loan-to-Value Requirements
Your home must meet standard Fannie Mae property eligibility requirements. Single-family homes, condos, and planned unit developments typically qualify, while manufactured homes and co-ops have additional restrictions.
The loan-to-value ratio cannot exceed certain thresholds, though these limits are generally more flexible than conventional refinance programs. Your lender will order an appraisal to determine current property value.
If your home's value has declined since purchase, you might still qualify for Refi Possible even if you owe more than the home is worth, depending on the specific loan-to-value limits in effect.
Common Complications and Gotchas
Income documentation can become complex if your earnings have changed significantly since your original mortgage. If you've switched jobs, received promotions, or experienced income reductions, expect additional scrutiny from underwriters.
Property condition issues discovered during the appraisal can delay or derail your refinance. Unlike purchase transactions, you cannot negotiate with a seller to address these problems.
Timing can work against you if interest rates rise between application and closing. Since Refi Possible requires a tangible benefit, rate increases might eliminate the advantage that made you eligible initially.
Title issues that weren't caught during your original purchase can surface during refinancing. Unpaid contractor liens, boundary disputes, or errors in public records might require resolution before closing.
References
For the official guidelines, see 4302.1: Purchase of Refi Possible® Mortgages in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Freddie Mac Guideline Text
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is a “no cash-out” refinance offering for low-income Borrowers originated in accordance with the Guide and this chapter.
