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If your existing mortgage is backed by the government, you may be entitled to refinance under a “streamline refinance” program. These cut both the time and the paperwork required, and often make it much easier to get approved because some ignore your employment status, the current market value of your home and your credit score and report.
If you have a mortgage provided under any of the following government-backed programs, read on to discover the benefits offered by a streamline refinancing and to learn about some of the rules and restrictions that surround them:
Please note that, just because the government (which guarantees the loans) sets eligibility rules, that doesn’t mean that every lender (which puts up the money) has to accept them. Lenders are entitled to impose their own eligibility criteria, and your existing one may be stricter than others. Don’t despair. Simply shop around for a lender that’s more comfortable with your personal circumstances.
If you currently have an FHA loan, and want to cut your monthly payments by refinancing to a lower rate, you may benefit from this streamline program. Among its major attractions, which generally apply:
The VA calls a mortgage refinanced under its streamline program an “Interest Rate Reduction Refinance Loan” (IRRRL), and it’s sometimes referred to as a VA-to-VA refinance or loan. In some ways, the offering is similar to the FHA’s (see above for details), including:
However, the VA’s program differs from the FHA one in some important respects:
A new streamlined version of the Home Affordable Refinance Program is due to be launched in October 2017. In the meantime, the existing program has been extended to fill the gap.
The big hurdle with HARP is that it applies only to mortgages guaranteed by Fannie Mae and Freddie Mac. But keep reading, because many homeowners don’t know their loan is guaranteed by one of those, they don’t realize their original lender may have sold on their mortgage in a secondary market. In fact, it doesn’t matter from whom you originally borrowed or what logos are on your mortgage statements, you can only tell whether yours qualifies for HARP by checking. You can do so by using the online look-up tools on Fannie’s website and Freddie’s website – and you must use BOTH to be sure. Another requirement is that your mortgage was originated on or before May 31, 2009.
HARP exists to help those who have little or no “equity” in their homes. Equity is the difference between the amount you owe on your mortgage today and the current market value of your home. So if your home’s worth $100,000 and your mortgage balance is $120,000 you have negative equity, which is often called being “underwater” or “upside down.” In that case, your loan-to-value (LTV) ratio is 120 percent, because you determine your LTV by dividing your mortgage balance by your home’s value by your mortgage balance and moving the decimal point a couple of places to the right.
That’s not a problem with HARP. In fact, you won’t be eligible if your LTV is lower than 80 percent. And, there’s no fixed cap on how high your LTV can be. So even if you owe twice as much or more on your mortgage than your home is worth, you may still qualify.
But first you have to meet some further eligibility criteria:
As the official HARP website suggests, “Even if you applied for HARP refinancing before and were declined, look into it again. With expanded requirements, more people are now eligible.”
Like other streamlined programs, this United States Department of Agriculture offering allows you to refinance your loan with minimum cost, fuss and bother. You won’t need an appraisal (unless you’ve received subsidy during your loan term), provide a credit report or undergo a debt-to-income calculation. And you can roll up the guarantee fee and other eligible closing costs in your new mortgage.
However, there are some eligibility criteria: