The Home Affordable Refinance Program (HARP) was designed to help homeowners with underwater mortgage loans qualify for today’s best refinance rates. The program was just revised under HARP 2.0 to get more people qualified. If you were denied when the program first came out or have been putting off refinancing because you think you won’t qualify, HARP 2.0 could lower your payment by an average of 34%. Here’s what you need to know about qualifying for the government refinance program known as HARP 2.0.
HARP is for Underwater Homeowners Like You
Being underwater means you owe more for your mortgage loan than your home is worth. In the past having a loan to value ratio higher than 80% made it difficult, even impossible to qualify for mortgage refinancing. That’s where the Home Affordable Refinance Program comes in.
Much like the FHA streamline refinance or the VA’s Interest Rate Reduction Refinance Loan (IRRRL), HARP removes the requirement for home appraisal and income verification that come with traditional mortgage refinancing. By not requiring an appraisal HARP eliminates the loan to value requirements preventing millions of underwater mortgage holders from qualifying for mortgage refinancing.
This government refinance program also eliminates mortgage insurance for homeowners with less than 20 percent equity making HARP refinancing that much more attractive.
If you’re not paying for Private Mortgage Insurance (PMI) on your existing home loan you won’t be required to pick it up with your HARP refinance.
HARP Government Refinance Program Requirements
The problem with the original Home Affordable Refinance Program is that it was limited to loan to value ratios under 125%. The program was also plagued with lender overlays, lender specific rules limiting their participation in the program. These program overlays often required credit checks and appraisals which defeated the purpose of the program entirely.
President Obama revised the Home Affordable Refinance Program by executive order and HARP 2.0 was born. Gone is the 125% loan to value limit and there are new incentives to reduce risk for lenders and eliminate program overlays.
Here are the government refinance program requirements you need to meet to qualify for your HARP refinance:
- Fannie Mae or Freddie Mac must have acquired your mortgage prior to June 1st, 2009
- You must have made your last six payments on time and can only have one late payment out of your last 12
- Your loan to value ratio must be higher than 80 percent
No matter how far underwater you are in your existing home loan if you meet these requirements you can take advantage of today’s best refinance rates under HARP.
This isn’t to say that program overlays don’t exist with HARP 2.0, you’ll still find lenders playing by their own rules. If one lender denies your HARP 2.0 application and you’re willing to do a little legwork there’s a lender out there willing to approve you.
Beware Lender Fees on Your HARP Refinance
Just because you’re HARP refinance eligible doesn’t mean you don’t have to watch out for closing costs like the loan origination fee and discount points. In fact, part of the incentives included in HARP 2.0 to sweeten the deal for lenders is free reign to charge whatever they like for certain fees.
This is why refinance rate shopping with zero discount point quotes comparing interest rates and fees is so important. Pay close attention to and question the fees found in section 800 of your Good Faith Estimate. Common junk fees include processing fees, application fees and anything resembling a rate lock fee.
The less you pay closing on your HARP refinance the more benefit you’ll get from today’s best refinance rates. The reason fees are so important is that if you’re not able to break even recouping your out-of-pocket expenses because you paid unnecessary discount points or junk fees you’re going to be losing money no matter how low the interest rate.
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You can learn more about getting the best deal on your HARP refinance by avoiding lender junk fees and points by checking out my free Underground Mortgage Videos.
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