Welcome to our week-long series on refinancing your mortgage. In this second of five articles, we look at the Home Affordable Refinance Program, better known as HARP.
As the real estate market hit bottom, it created a significant hurdle to refinancing–home values. Many homeowners owe more to the bank than the value of their home. As a result, they could not take advantage of historically low mortgage rates.
Enter the government. Through the Home Affordable Refinance Program, you may be able to refinance your mortgage to a lower rate even if you owe more than your home is worth. And late last year, the government sweetened the pot by modifying HARP to allow homeowners to refi regardless of how much they are underwater.
We’ll take a look at this change, the eligibility requirements of HARP, and how you can get started with a refi under this program.
What changes were made to HARP?
The big change to HARP in 2011 was removing the cap on the loan-to-value ratio that prevents many homeowners from refinancing. Under the old rules, you could not refinance if you owed more than 125% of your home’s value. That limitation has been removed under the new rules.
In fact, you now must have a loan-to-value ratio of greater than 80% to refinance under HARP at all.
In 2013, they also extended the deadline for HARP refinances to December 31, 2015. And they eliminated certain fees, including the need to get a new appraisal in some circumstances.
So those were the changes last year. Now let’s look at who is eligible to take advantage of a HARP refinance.
Who is eligible?
To qualify for a HAPR refi–
- You must have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac
- Your mortgage must have been sold to those agencies on or before May 31, 2009
- The loan-to-value ratio on your mortgage must be greater than 80% because if it’s less than this, you should be able to refinance without the help of the program
- You must be current on your mortgage at the time of the refinance, and you must have a good payment history for the past twelve months
In addition, you can only use this program once. So if you’ve already refinanced your mortgage under HARP, you aren’t eligible. The one exception: you’ll still be eligible if your mortgage was refinanced under HARP from March-May 2009.
Now, if reading the above eligibility requirements is more painful than a root canal, there is an easy way to find out if you qualify–call your existing mortgage company. There should be a customer service telephone number on your monthly statement. If you call the number, they will connect you with somebody who can tell you if you qualify for a HARP refi.
If you do call your existing mortgage company, make sure to compare mortgage rates with other lenders. It’s easy to compare mortgage rates online, and you may find a better deal somewhere else.
If you’d like to do some of the leg work yourself, keep reading.
How do you get started?
The first step is to figure out if your mortgage is owned by Fannie Mae or Freddie Mac. Fortunately, both agencies have an online tool you can use to see if either of them own your mortgage:
You can also get information over the phone. CAll either 1-800-7FANNIE or 1-800-FREDDIE, depending on which agency backs your loan.
If either agency owns your mortgage and you believe you are otherwise eligible for the HARP program, start shopping for the lowest mortgage rates you can find. Once you find the best deal, the bank or mortgage broker will be able to walk you through the process.
Tomorrow we are going to look at what’s called an FHA streamlined refinance, which is ideal for those with mortgages insured by the FHA.
Published or updated April 16, 2013.