If you are barely treading water with your mortgage payments, a loan through the Home Affordable Refinance Program, or HARP, may be for you. HARP loans are designed for home owners who need to refinance to keep their homes but fail to qualify for typical refinancing. If you qualify, a HARP loan can help you obtain a mortgage with more affordable terms.
What Is a HARP Loan?
The federal government launched HARP in direct response to the home loan crisis of the early- to mid-2000s. With millions of Americans in danger of losing their homes, the Federal Housing Finance Agency began offering these special refinance loans in March 2009. The program is slated to run through December 31, 2015.
Although HARP loans are like traditional refinance loans in many ways, there are also some important differences. As with standard refinance loans, HARP applicants must submit a loan application, go through the underwriting process, and pay refinancing fees. On the other hand, HARP refinancing does not require home owners to have equity in their homes. This is a big change from traditional refinancing, which imposes strict equity requirements on home owners.
Who Is Eligible?
Before applying for a HARP loan, it is important to determine if you meet the program’s requirements. Although the financial criteria for HARP qualification are quite flexible, other requirements are rather narrow in scope.
Home owners must be current on their existing mortgage. Additionally, you must be able to show at least one year’s worth of timely payments. Home owners must have no late payments within the previous six months and are allowed just one 30-day late payment within the past six to 12 months.
HARP loans are available for primary residences, second homes, and investment properties.
- Your home’s fair market value must have declined since your purchase.
- You must be underwater on your mortgage. Specifically, your loan-to-value ratio must be greater than 80 percent.
- Your original mortgage must be guaranteed by Freddie Mac or Fannie Mae.
- You must have closed on your original home loan before May 31, 2009. Home owners who closed after May 31, 2009 are not eligible for the program.
What Are the Benefits?
HARP loans offer home owners several benefits.
No mortgage insurance. Many home owners discover that refinancing will require them to pay costly mortgage insurance, which protects lenders from an owner’s default. With a HARP loan, you are not required to pay mortgage insurance, even if you owe significantly more than your house is worth.
More flexible underwriting requirements.
To make the program accessible to more people, HARP underwriting guidelines are significantly more lenient than those of traditional refinance loans. This means that borrowers with less than stellar credit or a high loan-to-value ratio are eligible.
Lower closing costs.
Closing costs are capped, which makes the HARP loan an attractive option for home owners who qualify.
In many cases, there is no appraisal requirement. Skipping the appraisal saves home owners both time and money.
Better mortgage terms.
HARP loans offer more attractive mortgage conditions, such as lower interest rates and shorter loan terms.
If you are struggling to get by, a HARP loan could help you avoid foreclosure. Although the federal government has extended the program once already, it has made no announcements regarding an additional extension. If you meet the program’s criteria, it is important to submit your application before the December 31, 2015 deadline.