HARP – Home Affordable Refinance Program.
The acronym helps us remember what the letters stand for, but what is HARP and why was it created? HARP was developed by the Federal Housing Finance Agency in an effort to help homeowners, with little or no equity in their homes, refinance their mortgage. That means, if you owe as much – or more – than your home is worth, you may be eligible for a HARP refinance.
Before deciding if HARP is right for you or even before discovering if you’re eligible for this program, it’s important to understand why you’d want to refinance in the first place. The primary reasons to refinance are the ability to save money through:
- A lower monthly payment
- A reduced interest rate
- The security of a fixed-rate mortgage
- Faster equity growth
- Potentially lower closing costs
If any or all of these benefits meet a current financial want or need, then this might be the right time to refinance your mortgage. Now the question is: Are you eligible for HARP?
Finding a lender to help you refinance when you have little equity in your home (or owe as much as your home’s value) can be very difficult. However, there are many borrowers in this position who are eligible for HARP because they meet specific criteria. To qualify for HARP, you must:
- Be current on your mortgage, with no 30-day+ late payments in the last six months and no more than one in the past 12 months.
- Be living in a home that is your primary residence, a 1-unit second home or a 1- to 4-unit investment property.
- Have a Freddie Mac or Fannie Mae owned loan.
- Have a current loan originated on or before May 31, 2009.
- Have a current loan-to-value (LTV) ratio greater than 80%.
HARP Pros & Cons
As with any refinance program, there are both positives and negatives. HARP is no different. The secret is to weigh those pros and cons before making a final decision.
- The appraisal value of your home will be calculated by a Fannie Mae or Freddie Mac automated system. So you shouldn’t have to concern yourself with appraisal costs or appraisers coming into your home.
- If you have good FICO® Scores, you can get great terms, including: a zero cost refinance at low interest rates – no matter how much the new value of your home. Plus you shouldn’t be charged closing or other service costs that you’d usually pay with a traditional mortgage refinance program.
- A HARP refinance agreement is treated the same as any other type of mortgage refinance and will not adversely affect your credit.
- If your loan has mortgage insurance, you may only have an option to refinance with your current lender. Having mortgage insurance sometimes restricts you from changing lenders in order to get the best terms and rates.
- Credit problems or maxed out credit cards could prohibit you from getting the loan terms and rates you really want.
The final day to get a HARP refinance is September 30, 2017. It might seem far away now, but as you know, time flies… especially when there are so many factors to take into account in order to make the best decision. So the best advice is to “start planning now.”
There are people in the myFICO forum discussing and asking questions about HARP – take a quick look at what they have to say. And while you’re there, get information about a loan refinance many people don’t ever think about: auto refinance.