When the federal Home Affordable Refinance Program (HARP) launched in 2009, millions took advantage, but many other homeowners found they couldn’t qualify to refinance their underwater mortgages. Today, significant enhancements have made the program more accessible for homeowners and a great opportunity to lower payments or build equity faster.
If you owe as much or more on your home than its current value, you’re considered “underwater” or “upside-down” on your mortgage. For some homeowners, the situation has led to foreclosure. Others, however, have stayed current on their mortgage payments, and those are the people HARP is intended to help.
You may be eligible for HARP if:
* You are current on your mortgage.
* Fannie Mae or Freddie Mac backs or owns your mortgage, and they acquired your mortgage on or before May 31, 2009. Use Fannie Mae’s and Freddie Mac’s online tools to find out.
* The mortgage is for your primary home, a single-family second home or a one- to four-unit investment property.
If you’re underwater but still able to afford your current mortgage payment, you may wonder why you would want to refinance. Refinancing a higher interest rate mortgage is a great way to obtain a lower rate that saves you money over the life of the loan. Unfortunately, traditional refinances are not designed to help people whose current home debt exceeds their home’s value. For underwater homeowners, qualifying for refinancing is virtually impossible without HARP.
When you refinance through HARP, you’ll likely end up with a lower monthly payment, a shorter-loan term or you can even refinance an adjustable rate mortgage into a 30-year fixed rate mortgage. You can invest those savings in other areas, such as home improvements, retirement savings or college funds. Home improvements, in particular, can be a great investment because they can increase your home’s value, even as you continue to pay down how much you owe on it.
With mortgage interest rates still historically low – but likely to rise – and the changes to HARP, it’s a good time for underwater homeowners to consider applying for the refinancing program. More homeowners will qualify under the new provisions, and some who were previously declined for the program may now be able to qualify for it.
Key HARP changes include:
* No underwater limits – Borrowers will now be able to refinance regardless of how far their homes have fallen in value. Previous loan-to-value limits were set at 125 percent. For example, if your home value was $ 100,000, your mortgage couldn’t exceed $ 125,000 in order for you to qualify for HARP. That limit has been lifted, so now you may qualify even if you owe much more than your home is worth.
* No appraisals or underwriting – Most homeowners will not have to get an appraisal or have their loan underwritten, making their refinance process smoother and faster.
* Modified fees – Certain risk-based fees have been reduced or eliminated altogether for borrowers who refinance into shorter-term loans.
* Less paperwork – Lenders have the option of qualifying a borrower by documenting that the borrower has at least 12 months of mortgage payments in reserve.
Perhaps most important, the deadline to apply for refinancing through HARP has been extended. Homeowners now have until Dec. 31, 2015 to apply, but take advantage of current low mortgage rates. To learn more about the new HARP and if you may be eligible to participate, visit www.HARP.gov.