Why You Need a HARP Refinance Now

If you're among the folks who financed before mid-2009 you really need to look at the government's HARP program, a refinancing plan that can cut mortgage costs by an estimated $200 a month and eliminate a lot of financial hazards and risks.

While real estate values have generally been rising, they have not risen enough for many homeowners. According to ATTOM Data Solutions, there are 6.7 million homes – almost 12 percent of all homes with a mortgage – which remain financially underwater. Of these, the government estimates that roughly 325,000 homeowners can benefit from the HARP program.

Why does anyone need a HARP loan? Underwater borrowers who wish to refinance an old ARM or a mortgage with a steep interest rate – prime mortgages averaged more than 5 percent in 2009 – are pretty much stuck. Typical lender requirements demand that borrowers have equity in their homes before a property can be refinanced, so no equity equals no opportunity for lower rates or a better loan.

To resolve this problem, the government developed the HARP program. It allows qualified borrowers to refinance even if they are deeply underwater – there is essentially no loan-to-value requirement under HARP.

In other words, if you have financing from before the financial meltdown, the odds of getting a new loan are just about zero if your property is underwater. With HARP, you can by-pass traditional lending standards and get a lower cost mortgage.

HARP Qualification Basics

Since this is a government program, you can imagine that there are a few hurdles to cross. The good news is that this is one case where there has been an effort to make loan applications easy.

First, your loan has to be originated before May 31, 2009.

Second, the program is open to those with good mortgage credit. That means you cannot have had a late payment during the past six months and not more than one late payment in the past year.

Third, the loan must now be owned by Fannie Mae or Freddie Mac. To check loan ownership you can use the look-up tools at Freddie Mac and Fannie Mae.

Fourth, a range of properties qualify, including owner-occupied homes with one-to-four units and second homes. Investors can qualify with one- to four-unit properties. Note that investors were not included in the original HARP program and as a result some property owners who did not qualify in the past for HARP may now be eligible for the program.

Fifth, your loan-to-value (LTV) ratio must exceed 80 percent. Example: Your property is worth $200,000 and your first and second loans total $165,000. This gives you a loan-to-value ratio of 82.5 percent. To check your property's LTV go to Fannie Mae's loan-to-value tool.

Not only can the HARP program slash monthly costs, it can also help borrowers move from adjustable to fixed-rate loan products at a time when mortgage rates are remarkably low. Another advantage is that it can get borrowers out of toxic loans such as option ARMs and into a comfy fixed-rate mortgage.

For more information contact HARP qualified lenders.

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