The HARP refinance program is a confusing and intimidating topic for many homeowners. Do you currently owe the bank more than what your home is worth? The economic downturn sidelined millions of American homeowners like yourself from taking advantage of historically low refinance rates until now. Here's what you need to know about the HARP refinance program to help you get the best possible deal.
The Home Affordable Refinance Program
Owing more than your home's value is not a pleasant situation to find yourself in; it is commonly referred to as being "underwater." Before the government intervened with the Home Affordable Refinance Program, being underwater almost guaranteed that no lender would ever talk to you.
It took two revisions and an executive order by the President to get it done, but today's Home Affordable Refinance Program could be exactly what you need to lower your mortgage payment with today's low refinance rates.
What Is a HARP Refinance?
The HARP program allows you to refinance your underwater mortgage regardless of how much you owe. You can't be too underwater to qualify. There are however, a few requirements that you must meet to qualify. First, your home loan must be backed by Fannie Mae or Freddie Mac and must have been originated prior to June 1st, 2009. Unfortunately VA, FHA, USDA and jumbo mortgage loans are not eligible for the HARP program. Additionally, you must be current on your payments and not have any late payments during the previous six months.
If you meet these requirements you're HARP eligible. While this is good news, being HARP eligible means you can refinance but it doesn't guarantee you low rates and fees. This is where doing your homework can save you thousands of dollars from unnecessary points and fees.
Not All HARP Lenders Are Created Equally
It is possible that your current lender could deny your HARP application even though you meet the program guidelines. Some lenders impose their own restrictions called "overlays" on HARP applicants beyond what government specifies in the program requirements. The same goes for interest rates and fees. When shopping for HARP refinance rates and fees it's not uncommon to find a wide variation from one lender to the next.
You're not required to refinance with your existing lender with the Home Affordable Refinance Program. You might want to consider enlisting the help of a licensed mortgage broker to help find the right lender for your next home loan.
Consider Shorter Term Lengths For Lower Rates
If you want the lowest possible HARP refinance rates, consider choosing a 15 or 20 year term length. The reason for this is that HARP loans are subject to Loan Level Pricing Adjustments (LLPA). These adjustments increase the cost of refinancing, meaning you'll be required to pay discount points or accept higher interest rates based on the level of risk you pose to prospective lenders.
Fannie Mae and Freddie Mac both have reduced Loan Level Pricing Adjustments for loan term lengths of 20 years or less. This means that the HARP refinance rates you get on a 15 or 20 year mortgage could actually be lower than what you would find with traditional mortgage refinancing.