Is a HARP Refinance Right For You?

Is the government refinance program known as HARP 2.0 right for you? The Home Affordable Refinance Program (HARP 2.0) has undergone a number of revisions intended to get more people qualified. If you have less than 80% equity in your home and are struggling this government refinance program is worth looking at. Here are the basics you need to know about getting your HARP 2.0 application approved.

Am I Eligible for HARP 2.0?

The deciding factor for most folks is whether or not Fannie Mae or Freddie Mac purchased their mortgage before June 1st, 2009. If your mortgage is held privately by a lender like Bank of America or Wells Fargo you are not eligible for HARP 2.0.

If you’re not sure if your mortgage is privately held both Fannie Mae and Freddie Mac have a way of checking online.

Fannie Mae Loan Lookup:

http://www.knowyouroptions.com/loanlookup

Freddie Mac HARP Eligibility Lookup:

http://www.freddiemac.com/avoidforeclosure/harp_eligibility.html

HARP 3.0 is rumored to remove the Fannie Mae or Freddie Mac government refinance program requirement; however, these changes have yet to materialize.

Once you verify that Fannie Mae or Freddie Mac have your mortgage you need to be current on all your payments for the last six months. Beyond the six month requirement you must also have made 11 of your last 12 payments on time and have less than 20% equity to qualify.

I’m HARP 2.0 Eligible, Now What?

HARP is set to expire at the end of 2013. The next step for you once you’ve determined that you’re HARP 2.0 eligible is to shop for a lender. This is where it gets tricky for many homeowners. What you might discover is that even though you’re qualified for this government refinance program is that your lender denies your application.

What the #$%@?! I’m eligible, why was my HARP refinance application denied?!

Lender Overlays: The Fly In Your Soup

HARP 2.0 has come a long way to get underwater homeowners qualified for mortgage refinancing. Where it hasn’t made great strides is limiting risk for mortgage lenders. Overlays are special rules lenders use to limit their risk with the program. These rules include limits on loan-to-value, minimum credit score and income. It’s not uncommon for homeowners with 125% loan-to-value or higher to find their current lender denies a HARP refinance application.

Was Your HARP Refinance Denied? Keep Trying…

Not all mortgage lenders enforce overlays with the Home Affordable Refinance Program and the ones that do all play by their own rules. Just because one lender denies your HARP application doesn’t mean another one will. That’s why shopping around for a government refinance program approval is so important.

Remember once you’re approved you’ll still be required to pay fees to close on your HARP refinance.

Just like lender overlays closing costs vary widely from one lender to the next and some fees are negotiable. The loan origination fee is an example of one negotiable closing cost that you’ll want to pay as little as possible on your HARP refinance. Other fees like discount points drive up your out-of-pocket costs reducing the benefit you’re getting from today’s low mortgage rates.