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HARP - Home Affordable Refinance Program

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What is the HARP Program?

In the wake of the housing crisis, millions of homeowners saw their home values plummet. At the same time, interest rates dropped to historic lows. Without enough equity, however, traditional mortgage refinancing wasn't an option. That's one major reason for the implementation of the Home Affordable Refinance Program, and you can learn more about it below.

Home Affordable Refinance Program History

The Home Affordable Refinance Program, which is usually referred to simply as HARP, has been around in one form or another since 2009. All along, the goal of the program was to help homeowners who were underwater on their mortgages, which means that they owed more than their homes were worth or had negative equity. In its original form, HARP was extremely restrictive, so few homeowners took advantage of the program.

HARP vs. HARP 2.0

In the fall of 2011, the government unveiled HARP 2.0, which made the program more accessible. As with the original loan program, it is designed to allow underwater homeowners to take advantage of today's low interest rates.

The original HARP program placed limits on how much a homeowner's loan-to-value ratio could be, but HARP 2.0 did away with the LTV restriction thereby allowing more homeowners the ability to refinance.

With a HARP mortgage, a homeowner with no home equity is able to refinance current mortgage and receive a new first mortgage. It usually comes with a lower interest rate, more stable terms and provides lower monthly mortgage payments. One drawback of the current HARP program is that it's limited to people whose mortgages are backed up by Fannie Mae and Freddie Mac. HARP 3.0, which has been proposed by the Obama administration, would expand the program so that many more homeowners could take advantage of it.

Current HARP Eligibility Requirements

It's relatively easy to determine if you are qualified for the current HARP program. A few key points about HARP eligibility include:

  • The current loan-to-value ratio on your mortgage must be 80 percent or higher. In other words, you must be upside down or have no equity.
  • Your mortgage must be backed by Fannie Mae or Freddie Mac. Find out if your Freddie Mac mortgage is qualified here, and find out if your Fannie Mae mortgage is qualified here.
  • Your home loan must have been sold to Fannie or Freddie on or before May 31, 2009.
  • You can't have used a HARP refinance before. One exception is if you refinanced a Fannie Mae loan between March and May of 2009.
  • You must be current with your mortgage payments and can't have any late payments in the last 12 months. A payment is considered late if it is made at least 30 days after the due date.
When Should You Look into a HARP Refinance

If you are upside down on your home mortgage and meet the other HARP eligibility requirements, the time to act is now. Although HARP 3.0 may be offered in the future, there are no guarantees. The current program expires on December 31, 2013. Without acting before then, you may miss your chance to refinance your mortgage under current HARP guidelines.

Benefits of Refinancing Under HARP

As long as you meet the loan requirements of HARP, refinancing your mortgage under this government program could bring many benefits to the table. A few of the top examples include:

  • You will receive a new, low rate mortgage. Depending on its terms, it may allow you to build equity in your home more quickly by refinancing to shorter loan term.
  • When you refinance your mortgage under HARP guidelines, you will be able to take advantage of today's low interest rates. You could save thousands of dollars throughout the term of your loan.
  • If you can barely afford your current mortgage, a HARP loan could allow you to avoid foreclosure in the future.
  • With a HARP mortgage, you may be able to move from an adjustable-rate mortgage to a fixed-rate mortgage, which will provide greater stability and make it easier for you to manage your finances over the long term.
How to Refinance a Mortgage with HARP

If you believe you qualify for a HARP loan, it's easy to get the process rolling. Follow these steps to get started:

  1. Figure out the loan-to-value ratio of your mortgage. As long as you have no equity or very little equity, a lender should be willing to work with you.
  2. Confirm that your home loan is owned or guaranteed by Freddie Mac or Fannie Mae. There are loan look-up tools online that make this easy to do.
  3. Contact your current loan servicer, which is the company that collects your mortgage payments each month. Find out whether your mortgage servicer participates in HARP. If not, find a servicer who is approved by Freddie Mac or Fannie Mae.
  4. Shop around a little before working with a servicer on your HARP refinance to ensure that you get the best terms and interest rate possible.
Should You Wait for Harp 3.0 Loan?

Currently, a new version of the HARP loan has not been approved. The loan requirements of a new refinance program are also unknown, but President Obama would like to make the refinance program less restrictive to allow more homeowners to participate. If the new version of the program is not approved, the Home Affordable Refinance Program could expire entirely at the end of 2013.

What You Need to Provide to Refinance Using a HARP Home Loan

Keep in mind that applying for a HARP loan is no different than applying for any other mortgage. You will need to gather your documents, submit a loan application, and you will have to go through underwriting. Following is a list of the basic documents needed for the refinance:

  • One month most recent paystubs
  • Last two years federal tax returns with all pages
  • Last two years of W-2's and 1099's
  • Most recent two months of bank statements with all pages for all accounts
  • Copy of current mortgage payment coupon or statement
  • Copy of current homeowners insurance policy
  • Copy of drivers license and social security cards

If your loan is approved, you will also incur mortgage closing costs which maybe financed into your home loan. However, the amount that you could save through a HARP mortgage should far out weight these mortgage expenses.

How to Take Advantage of the Home Affordable Refinance Program

Knowing how to refinance a mortgage with HARP is the first step in obtaining a more affordable home loan. By working with a qualified mortgage lender, you should be able to get through the mortgage refinance process smoothly. The end result should be more favorable loan terms and a lower monthly mortgage payment.

Thousands of homeowners have already take advantage of HARP. If you'd like to join them, start exploring your refinancing options today. Before you know it, you could start enjoying lower monthly mortgage payments.


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