If you’re an underwater homeowner looking to refinance with the Home Affordable Refinance Program there are several things you need to know about HARP Refinance Rates. Just because you’re in a government refinance program doesn’t mean you shouldn’t be comparison shopping for the lowest HARP refinance rates and fees. Here are several tips to help you find the best HARP refinance rates while avoiding lender junk fees and unnecessary discount points.
Find Your Best HARP Refinance Rates
The Home Affordable Refinance Program is the best thing to happen to your underwater mortgage. The problem is that lender participation is voluntary making it extremely difficult to shop for the lowest HARP refinance rates and fees. In fact, most homeowners don’t comparison shop at all, choosing the first lender to approve their HARP mortgage application.
The government built incentives to increase participation in the program that give lenders near free reign when it comes many of the fees you pay at closing. The government does nothing to make sure lenders aren’t fleecing you when it comes to thing like the loan origination fee and discount points.
If you’re only shopping for your mortgage refinance approval and not comparing fees AND refinance rates you will be overpaying for your HARP refinance rates.
Mortgage Refinancing Is All About Fees
Many underwater homeowners are just happy to get an approval and see their payments go down. It doesn’t matter if you’re qualified for a conventional refinance or are in a government refinance program, the test of how good a deal you’re getting comes from the fees you pay.
The longer it takes you to break even recouping your out-of-pocket expenses the less benefit you’re getting from your lower HARP refinance rates. If you’re paying lender junk fees or unnecessary discount points it’s going to take you that much longer to break even.
You can approximate your break-even point by adding up all the fees you’re paying for mortgage loan origination, any discount points and lender fees and dividing by that amount your mortgage payment will go down. This tells you the number of months it’s going to take to start benefiting from your new HARP refinance rates.
Suppose it’s going to cost you $5,000 to close on your HARP refinance and your payment will go down by $250. In this example it will take you 20 months, just under 2 years to break-even. This calculation only works if you keep the same term-length or go shorter with your new home loan. If you refinance a 15-year mortgage with a 30-year term length you’re going to be losing money no matter how low your interest rate.
How To Shop For Better HARP Refinance Rates & Fees
Don’t just settle for HARP approval. It doesn’t matter how underwater you’re are with the new program you can qualify. If your loan-to-value is greater than 125%, chances are you’re going to find lenders that deny your application because of overlays.
Overlays are lender specific rules for approving HARP applications. Many but not all lenders use overlays to reduce their risks from refinancing underwater home loans.
Instead of focusing on getting your HARP application approved focus on the fees found in section 800 of your Good Faith Estimate. If a lender denies your HARP application move on to the next lender.
Community based credit unions are an excellent starting point for finding lower HARP refinance rates and fees. This this government refinance program is excellent for underwater homeowners, just don’t make the mistake of shopping for the approval instead of shopping for the lowest HARP refinance rates and fees.
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