Home Affordable Refinance Program (HARP)
HARP is a Government program assisting homeowners who need relief from high interest on a mortgage loan or who owe more than their home is worth. Qualified homeowners can refinance their mortgages on more favorable terms.
Purchasing your own house is a large, long-term commitment for most buyers. Over the many years of that commitment, buyers may face an unexpected downturn in personal finances, the housing market may soar or bottom out, and interest rates may rise and fall. Wild and unplanned economic variations can throw homeowners into a tight financial crisis.
In an effort to support homeowners who are weathering the ups and downs of life and financial markets, the federal government established the Making Home Affordable Program. One aspect of the program is the Home Affordable Refinance Program (HARP), which is designed for homeowners who are up-to-date on mortgage payments but need relief from high interest or a loss of home value. The program originated in 2009. Congress adjusted some of the regulations in 2011, allowing additional participants to qualify. Here's an overview of the program benefits, eligibility, the application process and limitations. If you'd like to visit the government website directly, please click here
HARP is a federal program designed to help homeowners refinance mortgages that otherwise might not qualify for refinancing.
Eligibility for Upside Down Loans
- It is common for a refinancing institutions to refuse to refinance a loan that is "underwater" or "upside down." Borrowers who are in upside down loans ( loans where the amount owed is greater than the value of the home, typically a result of a second mortgage or falling home values) are excellent candidates for HARP. The program targets borrowers with a loan-to-value ratio of 80% or higher. Loan-to-value is a financial term that expresses the amount of the loan compared to the value of the purchased item. An LTV ratio of 80% or higher means that the amount of the mortgage is 80% or more of the value of the home. If you have paid off enough of your mortgage that you owe less than 80% of the value of the home, you are unlikely to qualify. When the housing market crashed, some homeowners found that they owed 120% or even 150% of the house's new assessed value.
- Buyers with adjustable rate mortgages who are facing a spike in interest rate can lock into a lower fixed interest rate.
Lower Monthly Payments
- Reducing interest rates can mean lower monthly payments for borrowers.
- Buyers who choose to keep their monthly payments the same after refinancing will reap the benefit of paying off the house sooner.
- The program allows qualifying homeowners to borrow up to 200% of the home's value.
Minimal Fees or Out-of-Pocket Expense
- The application process should not require anything more than a few nominal costs - if that. Most HARP refinancing happens without an exchange of money.
- Borrowers who have received large deposits no longer have to verify the source of the funds.
- You have the option of providing proof of income or proof of a 12-month reserve for the total cost of the mortgage including principal, interest, insurance, and applicable dues.
No Appraisal or Underwriting
- For the buyer, exclusion of appraisal means there is one less hurdle to jump. The process can be expedited.
Congress has enacted eligibility standards for this federally-funded program.
Current with payments
- HARP is not designed for borrowers who have defaulted on loans or who are facing short sales or foreclosure. It is for homeowners with perfect or near perfect payment records over the past 12 months.
Fannie Mae or Freddie Mac mortgage
- Eligibility is based on having a mortgage owned by Fannie Mae or Freddie Mac. To find if you're eligible based on the owner, search Fannie Mae
or Freddie Mac
Primary residence, 1-unit second home, or 1- to 4- unit investment property
Mortgage purchased prior to May 31, 2009
As with any substantial financial transaction, some requirements must be satisfied. Congress has attempted to minimize the paperwork and streamline the process. These steps are still necessary:
Gather financial information
- The step of gathering financial information can be the most intimidating of all. Remember that the time you spend tracking down paperwork could save you hundreds of dollars each month. It's worth it.
Determine your eligibility
- Review the requirements listed above and determine if you qualify. Remember that eligibility rules changed in 2011. If you were rejected prior to 2011, you may qualify now under the new set of guidelines.
Meet with a licensed mortgage professional or HARP expert
- You will want to have a professional help you submit your application. You should not be asked to pay any fees. If your mortgage company is not an approved HARP lender, you will need to find someone else who offers home mortgages.
Apply. Wait for approval. Close.
HARP cannot fix all mortgage problems.
Short sales or foreclosures
- If you are behind on payments or facing a short sale or foreclosure, this program cannot help. If you encounter a financial agent who promises to "save" your home through HARP refinancing, it is likely a scam.
- Unless Congress votes to extend, the program will expire on December 31, 2016. That due date allows only a limited opportunity to get into the program.
Reduction of principal
- HARP cannot reduce or renegotiate the principal owed for the house. Refinancing only changes the interest rate or the time of the mortgage. Your principal is a fixed price.
If you qualify, join the thousands of American homeowners who have placed themselves in a more solid financial situation by refinancing a home through HARP. Time is limited, but the payoff can make it worthwhile.