What HARP Changes Mean For Underwater Mortgage Refinancing

The Home Affordable Refinance Program (HARP) has been a dud since the program was created. Now by Executive Order, President Obama has made sweeping changes intended to qualify homeowners that need the help the most. Here’s how HARP can help you take advantage of today’s refinance mortgage rates from the best mortgage lenders if you’re underwater and owe more than your home is worth.

There Are No Loan-to-Value Restrictions

The best thing about changes to HARP is that you don’t have to qualify based on the equity in your home. Under the old program you couldn’t qualify if you owed more than 125% of your home’s value. This equity requirement has been eliminated so if you’re underwater you can qualify based on simply paying your mortgage on time. Also gone are the requirements to have an appraisal done…since loan-to-value is out of the picture there’s no need for an appraisal. Most of the fees associated with closing have also been eliminated to remove that barrier to mortgage refinancing.

What’s the Catch?

There’s always a catch to any government program in the United States and for HARP it’s a big one. Your mortgage must be held by Fannie Mae or Freddie Mac. If you’re underwater in a jumbo mortgage not backed by Fannie or Freddie or if your mortgage is held by a private bank you won’t qualify for HARP.

How to Qualify for Today’s Refinance Mortgage Rates

In order to qualify for HARP you must be current on your mortgage payments for six months and not have more than one late payment in the previous year. Fannie or Freddie must have had your mortgage loan prior to May 31st of 2009 and the property must serve as your primary home. (Anything larger than a four unit dwelling is excluded)

According to the government mortgage refinancing under the new program will save you $2,500 a year which works out to $200 or so a month based on today’s refinance mortgage rates. The Obama Administrations estimates that the new HARP program will help one million underwater homeowners qualify for mortgage refinancing.

Shorter Term Lengths Are Encouraged

The government is encouraging qualified homeowners to choose term-lengths of 15 to 20 years by eliminating most of the closing costs associated with these home loans. Under the old HARP program your only option was a 30-year fixed rate mortgage loan. The reasoning behind this move is by choosing shorter term-lengths underwater homeowners will build equity in their home at an accelerated rate.

How Soon Can I Apply for HARP Refinancing?

Fannie and Freddie are planning to have the full program details released by November 15th of 2011. The first home loans under HARP should be available by December 1st, although many lenders may not have their programs rolled out until the first quarter of next year (2012).