Mortgage rates are at record lows right now. Not only is it a good time to buy a home, but it is also a good time to refinance your home.
However, many homeowners aren’t aware that they can take advantage of low rates for a refinance. They think that because they are underwater on their mortgage, or because they have a loan-to-value ratio above 80%, they can’t refinance to a newer low rate.
For millions of homeowners, though, it’s actually possible to refinance through the Home Affordable Refinance Program (HARP).
What is HARP?
HARP was instituted in the wake of the real estate market crash and financial crisis in order to help responsible homeowners who wanted to refinance, but couldn’t, the government rolled out the HARP program. Since the initial roll-out, eligibility requirements have been expanded.
A HARP refinance streamlines some of the requirements of a refinance, including the appraisal process. You might have received information about a HARP refinance, but the way it’s marketed by some providers leads to the idea that it is a scam. It’s not, but you still need to be careful to compare mortgage lenders, and be careful about the terms of your refinance.
Who’s Eligible for HARP?
You can get information about HARP from the government website devoted to the program. According to the government, here are the eligibility requirements to take advantage of the program:
- Your mortgage must be owned by, or guaranteed by, Fannie Mae or Freddie Mac. If you have a FHA loan, you most likely qualify, as long as you meet the other requirements.
- Your mortgage must have been sold to Fannie or Freddie on or before May 31, 2009.
- This must be your first HARP refinance (unless you have a Fannie HARP refinance from between March and May 2009).
- Your current loan-to-value ratio must be more than 80%. You can refinance up to 125% of your home’s current value.
- You must be current on your mortgage, with a good payment history over the course of the last 12 months.
It’s possible to determine your eligibility through Fannie Mae or Freddie Mac, or you can contact your current mortgage servicer to find out whether or not you qualify. Realize, though, that not all mortgage servicers are participating in HARP. You can check with Fannie or Freddie, and then approach your current mortgage holder for information about whether or not you can refinance under HARP.
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If your current mortgage servicer won’t refinance you, shop around to other servicers. There are hundreds of mortgage lenders that will work with you on a HARP refinance.
I recently closed on a HARP refinance for my home. Recent housing value drops in my neighborhood led to a loan-to-value ratio of 90% on my FHA loan. I bought my home in 2007, before the crash, and my rate reflected the situation. However, after the drop, even though I have good credit and adequate income, I couldn’t get a more conventional refinance.
HARP helped my situation. My refinance was accomplished through Quicken Loans, and I didn’t have to go through an appraisal, and the process was mostly streamlined. My mortgage payment has been cut by about $300 a month.
You still have to pay fees, though. Loan origination fees are part of the deal. However, if you get a much lower interest rate (my is lower by more than 2%), the savings will make up for the fees. In my case, I will break even in about six months.
Hurry, though. Right now, HARP is scheduled to end on December 31, 2013.