If you are considering a HARP loan you should become well acquainted with some of its requirements as well as its offerings. This type of loan should be used as a last effort to save your home after it has decreased in value. But first, you would need to have a current mortgage under a Freddie Mac or Fannie Mae based loan. With that being said, here are a number of tips to help you function under this type of program.
What is the Basis of a HARP Loan?
After the market crash of 2008, a number of homeowners found themselves in deep financial trouble, especially in regard to their homes. You see, while their houses were undervalued due to a big economic hit they still had to pay on the same mortgage rates. If you were trying to sell your home at the time you know there was very little chance of profitability. Due to this factor, the Housing and Economic Recovery Act of 2008 was instated to help prevent further debt. During President Obama’s first term, the home affordable refinancing option was made available to help underwater homeowners with their mortgages and it has helped millions throughout the process. A long time homeowner can tell you that it’s rather difficult to refinance a home after the value has decreased. HARP is an established, quality program that will help you get the most out of your mortgage. Here’s a look at some of the requirements if you are considering home affordable refinancing.
How to Get Approved for the Home Affordable Refinance Program
Like all conditions of a refinance, a good mortgage record over 12 months is expected. This means that before you consider the Home Affordable Refinance Program, be sure to clear up any blemishes on your mortgage record. Also, make sure you haven’t previously refinanced under HARP unless you’ve refinanced under a Fannie Mae loan in the time of March-May 2009– your mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. As you can see, there are a few steps different from your conventional or federal government refinance.
Key Advantages of a HARP Loan
Most lenders will not accept a homeowner with a loan to value over 80% without expecting some type of mortgage insurance. Why? Well, the lender incurs a lot of risk because you may have other things to finance outside of your mortgage such as paying school loans, basic expenses, etc. This makes it hard to convince your lender that you are ready to refinance and can be a back and forth kind of conversation. Visualize Tom chasing Jerry– he never quite catches that mouse. However, this home affordable refinancing option has a bit less stringency. For example, you can still refinance if your loan to value ratio is over 80%. Some lenders will even accept you if the value goes up to 125%. Just make sure that you have your mortgage under control and are in dire need for assistance. In other words– turn to this method only when all else fails. It’s not all bad though. You’ll still be able to get a lower interest rate on your mortgage while in this program.
How Does HARP 2.0 Affect Your Mortgage?
Things do evolve with time and changes can always be made even in a HARP loan. There are a number of things to consider especially in regard to rates. In March 2012, the HARP 2.0 update set out a new set of rules to help even more people with underwater mortgages. Pretty much anyone that had a dire need of assistance in their mortgage, even at a loan to value of 125%, could apply for HARP. Another bonus is that the process became a lot faster because most lenders do not require an appraisal or underwriter process. This actually saves the homeowner money from a number of different fees and as a result, there were looser terms with verifying income.
The Home Affordable Refinance Program is Still Evolving (HARP 3.0)
Currently, Congress is still deciding to pass forth a new version of HARP to include homeowners who don’t have loans under Freddie Mac or Fannie Mae. Millions of homeowners can benefit from refinancing once these floodgates are open. Congress may also extend the amount of time this program lasts to help benefit those in need. The cutoff date for this program is December 31, 2015. It’s unknown if this will pass before the program ends.
Stay afloat to the current requirements and new changes that may occur with a HARP loan. There are some exciting things that’s happening with HARP as it evolves to a possible third update. Keep an eye on Congress and how the market develops especially in respect to your own mortgage situation.