Should I Refinance? Government Refinance Programs Available
By Karen Lawson
If your home is worth less than your mortgage balance, there are programs designed to help you gain the advantage of current refinance rates. Here are three examples:
FHA Streamline Refinance Program for Existing FHA Loans
This option can only be used by homeowners with existing FHA mortgages. The U.S. Department of Housing and Urban Development (HUD), which oversees FHA, streamline refinancing does not require a new appraisal, nor does it require verification of income or employment. Eligibility requirements include:
- Your mortgage payments must be current for the preceding 90 days.
- There can be no more than one late payment made on your existing mortgage within the past 12 months.
- Mortgage payments on your existing mortgage must be current when your streamline refinance closes.
Access to Current Mortgage Rates with HARP
The federal government’s Home Affordable Refinance Program (HARP) offers an opportunity for homeowners to refinance underwater home loans. Eligibility requirements for HARP refinancing include:
- Your mortgage must be owned by either Fannie Mae or Freddie Mac.
- Your mortgage must have been sold to Fannie Mae or Freddie Mac before June 1, 2009.
- Your mortgage cannot have been refinanced through HARP previously (Exception: Fannie Mae mortgage loans refinanced through HARP between March and May of 2009 may be eligible.)
- The loan-to-value ratio of your mortgage amount to home value must be greater than 80 percent. For example, if your home is worth $200,000 your mortgage balance must be greater than $160,000.
Not all Fannie Mae and Freddie Mac approved lenders participate in HARP. If you’re interested in the HARP program, act quickly as it is set to expire December 31, 2013.
Eligible veterans and surviving spouses can use the U.S. Department of Veterans Affairs (VA) home loan guaranty program for refinancing VA or non-VA home loans. VA allows homeowners to refinance 100 percent of their home’s current value; this can include taking cash out. Or, if you already have a VA home loan, you can refinance it through the IRRRL (Interest Rate Reduction Loan) program even if your home’s value has dropped and your mortgage is underwater.
- The funding fee for a VA refinance is substantially reduced.
- There is no credit underwriting performed unless your payment will increase by 20 percent or more or you are more than 30 days behind on your home loan.
- You don’t need an appraisal.
- If you want to finance allowable energy-efficient improvements (up to $6,000), you can include them in your refinance amount as well.
Current mortgage rates for these refinancing options can vary; shop and compare mortgage quotes for finding your best mortgage rate.