The concept of FHA Home Affordable Refinance Program sounds quite believable due to the similarities of both FHA and HARP, but both are actually separate entities. HARP has nothing to do with federal loans, but rather comes from Sallie Mae and Freddie Mac loans. However, it is easy to see why some people may get confused with certain eligibility and regulations that are the same in each particular refinance service. Below are some key details of similarities and differences regarding both federal loans as well as a Home Affordable Refinance Program.
What is Home Affordable Refinance Program?
First of all, you should know why HARP is beneficial. This was put forth during President Obama’s first term to help out homeowners who have a good mortgage record, but dwell in homes that are undervalued. The market crash of 2008 was the precursor to this type of program to help institute homeowners to cope with the tumbling rates. Eligibility for Home Affordable Refinancing requires your mortgage to have already been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. Additionally, you cannot have chosen this type of refinancing prior unless you refinanced a Fannie Mae loan under this program during March-May, 2009. Make sure your loan to value (LTV) ratio is greater than 80%. Most recently under the Desktop Underwriter Approval (DU), there are some companies that will allow you to refinance even at 150%. This is very different from most refinance companies who see you as a major risk when you go over that fine line of 80%. An FHA Home Affordable Refinance Program is not possible because FHA lenders do not allow you to go over that number. However, one thing synonymous with FHA Refinancing and Home Affordable Refinancing is you need at least 12 months of on-time mortgage payments.
What are Some FHA Requirements to Uphold?
FHA refinancing definitely separates itself from HARP. First of all, the Federal Housing Administration commenced in 1934 due to the housing decline in the Great Depression. The basis of this program was to help potential homeowners get mortgage insurance when they couldn’t afford to purchase their home. When it comes to your loan to value ratio, federal lenders typically accept applications only if you have used less than 20% of it in your home. The main reason why lenders are more prone to accept you, in this case, is because they still have wiggle room. Lenders never know if you’ll go into default or foreclosure on your mortgage. The LTV is used as a safety net. In any refinance situation, you want to be thorough in the application process and make sure you have everything well documented. They will need all of your information like W-2, credit cards, and even money from gift cards all presented. Account for all of your finances even ones that end up being significant gifts from relatives or friends. Make it easy on yourself and the lender when providing these details for a speedier approval.
Most People Confuse FHA HARP for a Typical Refinance Method
It’s easy to see why some consider FHA Home Affordable Refinance Program to be real. FHA loans and HARP have similarities that make it seem that it can combine into one entity. Also, since the government considers streamline refinance in their programs (even home affordable refinance), it’s not surprising that some people get confused. However, this is not the case. You have to consider the similarities such as lowering rates to help make your mortgage more stable. Also, having a good record of payments is necessary for both types of refinancing. Where they differ is the loan to value ratio. You should decide wisely on which option is more affordable for your needs.
In the end, you must pick one or the other. Do your research, contact representatives of Sallie Mae and Freddie Mac, and discuss with your lenders the possibilities you have. This will help you decide the best course of action and save you a lot of time.