The HARP refinance loan is a federal program set up in May 2009 by the Federal Housing Finance Agency to help eligible borrowers whose homes have deteriorated in value (little to no equity) to take advantage of the low interest rates. The program has helped many homeowners with underwater homes to be able to refinance their houses.
As a matter of fact, lenders rarely approve refinancing of homes with less than 20% equity. That means, that if the value of your home is less than the amount of the loan you owe the lender, you may not be able to qualify for a refinance if the interest falls. Following the US Housing market correction, many home owners experienced a sharp drop in the prices of their homes; therefore, this program targets such home owners who are current in their monthly payments but would like to refinance their homes. The HARP refinance program ends in December 2015. Please utilize this opportunity for as long as it lasts, if you wish to refinance your mortgage but you do not qualify.
There are many HARP lenders who are able to assist you in refinancing your mortgage. However, before you can think of refinancing, you must find out whether you qualify. To qualify for HARP, you must meet the following conditions:
1. The mortgage must be guaranteed or owned by Fannie Mae or Freddie Mac, who must have acquired the mortgage on or before May 31st 2009.
2. You must be current in your monthly repayments and have a good record for at least the past 12 months.
3. Your Loan to Home Value ratio must be more than 80%. For example, if your home is worth $10,000, you must owe the lender more than $8,000. In other words, the equity ratio must be less than 20%
4. You must live in your home and it must be your primary residence.
You might underestimate the benefits of HARP but until you are in desperate circumstances, you won't appreciate its benefits. Several things can change in the course of your mortgage term. For example, your monthly income might reduce, thus, prompting you to seek refinancing. Interest rates might also have dropped considerably, meaning you have an opportunity to save money if you refinance the mortgage. If your mortgage was an Adjustable Mortgage Rate (ARM), you have the option of applying for refinance. However, if you fail to qualify for refinancing because of low or no equity on your home, as well as bad credit, things can be very frustrating. This is where HARP lenders come into play.
The only limitation with HARP loans is the fact that it curbs you to only one loan in order to refinance. Notwithstanding, HARP has many great features which include: low closing fees, lenient underwriting process, lower mortgage insurance and sometimes no appraisal is required. Remember, when you refinance your mortgage through HARP, you also receive the same benefits that come with normal refinancing such as adjusting credit scores.
An important point to note is that you must prove that you will be able to keep up with the new monthly repayments; otherwise, no HARP lender will approve your application.