The Home Affordable Refinance Program

HARPWhen the economy went into recession a few years ago, the Obama administration was left scrambling to put things back on track and homeowners were left wondering what had happened to their investments. Some of them were lucky and only lost equity, but many homeowners found themselves facing foreclosure. To counteract the wave of loss that occurred, the administration created the Making Home Affordable, an umbrella term for multiple programs, all of which are designed to help those homeowners get back on track. One of the programs is the Home Affordable Refinance Program (HARP). If you lost equity due to the economic downturn, this program may be the key to regaining control of your mortgage.



What is the Home Affordable Refinance Program?

HARPTo put it simply, the Home Affordable Refinance Program is a program that is only available to homeowners who were affected by the economic downturn. This means that any loans acquired before May 31, 2009 are eligible to take advantage of HARP. With HARP homeowners can refinance their loans despite the fact that they have little to now equity. In fact, in many cases the homeowners are underwater on their mortgages (meaning they owe more than the home is worth), and they are still able to refinance through this program.

HARP operates through the federal government, so the lenders who can offer this to homeowners are those who are qualified FHA lenders. The FHA has been a lending source for thousands of homeowners for years because the qualifications for approval are much more lenient than you’ll find through a conventional lender. HARP is just another way for homeowners to take advantage of the benefits offered through FHA.

Meeting the Qualifications for HARP

Qualifying for the HARP program isn’t difficult. As mentioned above, the home must have been purchased before May 31, 2009. It’s also required that the loan you have be controlled by a conventional lender, which means your lender follows the underwriting guidelines of Freddie Mac and/or Fannie Mae. With the Home Affordable Refinance Program you will be taking advantage of FHA programs already in place and lenders already established. If you are underwater on your loan and you want to refinance but the loan is an FHA loan, you’ll want to look into the streamline refinance. This is the best option for FHA homeowners.

HARPIn order to qualify for HARP the loan you currently own must have less than 20% equity, although in most cases you’ll have much less than this, if you have any at all. It’s also imperative that you be current on the mortgage payments for the home. Payments that were made late or not at all over the most recent twelve month period will stop you when it comes to securing this loan.

With HARP you will refinance the entire loan amount, reducing your interest rate and your monthly mortgage payment. The theory behind the loan is that if you are able to reduce interest rates and payments then you will be able to make your payments more easily. A little tip worth mentioning is that if you save money through this refinance and can put that money back into your mortgage, you will regain your equity more quickly than you would otherwise. This can be a great way to get yourself out from under your underwater situation.

It’s impotent that you realize that even though you may be able to use HARP to reduce your interest rate or your mortgage payment, you will have to pay the closing costs and fees that come with a refinance as well. Refinancing isn’t a free process. Typically the closing costs run in the thousands. This doesn’t mean that it isn’t worth it to refinance – in most cases it is – but it does mean that you’ll need to plan for that expense. You also need to realize that it may take some time to recoup the money you pay to get the loan completed.

Refinancing can be a great way to save money on your home mortgage, and HARP is a good program for getting out from under a mortgage that’s gotten too big to handle. If you feel like this loan will help you with your mortgage, it would be worth your time to discuss your options with a lender and determine whether or not this loan will work for you.