Yale Roth M.A., M.Ed

HARP - Home Affordable Refinance Program. What Is It?

I’m getting a lot of mortgage questions about the HARP program so I thought I’d write a short post outlining what it is.

HARP, which stands for the Home Affordable Refinance Program, aims to make refinancing easier and possible for homeowners who are unable to refinance into a conventional or FHA mortgage because they owe more than their home is currently worth.

For example, if you currently owe more on your mortgage than your home is currently worth, the only way you can refinance the existing mortgage into a lower mortgage rate or shorter mortgage term is to take cash out of your savings and pay your mortgage down so there is equity.

Remember, equity is the difference between what your mortgage balance and your home’s value.

A lot of people either choose not to do this or cannot afford to pay the mortgage down.

And who can blame them.

To do this would be to take cash that has present day value and pay it against a declining asset.  Yes, you don’t want to think of your home as an asset, but it is and when the home value is dropping, the asset isn’t performing well. It’s like taking good cash and putting it against a bad asset.

So now people who are “underwater” can take advantage of the low mortgage rates and refinance their existing mortgage.

But wait, there’s more!

You have to qualify for HARP.

What are the HARP qualifications?

Here they are:

1. Your current mortgage must be owned by Fannie Mae or Freddie Mac.

2. The mortgage must have been sold to Fannie Mae or Freddie Mac before May 2009

3. You have to be current on your current mortgage and not have been late over the past 12 months.

4. The current loan to value ratio LTV cannot be lower than 80%

In addition, certain lenders put “overlays” on this criteria, which make it even tougher to get.

For example, some lenders still have a 125% loan to value cap as well as a minimum credit score requirement of 620.

Also, if you’re currently paying PMI private mortgage insurance, you aren’t eliglible for HARP or if you’re in a FHA mortgage, you’re not eligible for HARP.

What you want to do if you’re current mortgage balance is greater than what your home is currently worth is to contact your existing mortgage servicer and see if you qualify.

If you do, you want to shop around  to see where you can get the best HARP mortgage terms.

Related Posts:

• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• 6 Tips On How To Refinance Your Mortgage If Your Home Is “Underwater.”
• Mortgage Questions – “Can You Finance Your Mortgage Closing Costs?”
• FHA Mortgage Questions – “What Is A FHA Streamline Refinance?”
• Mortgage Refinance Questions – “What’s Your Mortgage Rate With No Points?” Is This The Right Mortgage Question?