Monday, September 23, 2013

Are you Eligible for the HARP Refinancing Program?

You’ve probably heard about the HARP or home affordable refinancing program if you’ve ever turned on the television any time between noon and four p.m., but do you know what it’s all about? The mortgage brokers and banks would love to help you with the program, of course, but like practically all the most important legislation coming out of Washington these days, the specifics are blurry if not totally muddled in a whole lot of politics, business interests, and other assorted garbage. 

Briefly, the HARP program is a means for homeowners who are “underwater” on their loans to lock in a lower financing rate on their home loan, which in turn reduces the monthly payment and helps to offset the phenomenal loss of home equity that many have experienced since 2006. In many cases, homes have lost half or more of their value as lenders locked up the easy financing terms that accompanied the housing boom, leaving a surplus of homes and a dearth of buyers for those homes. Talk about a buyer’s market! In the initial iteration of the program, you had to have a loan - to - value ratio of 105% to qualify. This meant that, basically, you had to be just a little underwater. Put simply, it’s that you owe $105,000 on a home currently valued at $100,000. However, as housing prices continued to plummet, the program went to 125%, and then   to an “unlimited” basis as both homeowners and the federal government fought to stem the tide of foreclosures that gripped the nation.

Far more homeowners today are eligible for HARP than you might expect, particularly in light of (relatively) recent changes to the program. If you’re too proud to use a federal program, though, think about this: If you’re still paying between 6% and 9% on your mortgage from the days when the housing boom began, today’s ~4% rate could save you tens of thousands of dollars over the life of your loan. Chew on that for a bit while you think about swallowing your pride! 

In order to be eligible for the newest iteration of the HARP program, called 2.0, there are several criteria that must be met. First, you have to be current and paid up to date with your mortgage. It might sound easy, but the program is designed to reward and help homeowners who have a proven track record of desiring to pay their mortgage. While it doesn’t do much to help homeowners in the 11th hour of foreclosure, it does help those who are its intended targets: people who want to keep their homes.

The second criteria that has to be fulfilled is that the mortgage must be owned or guaranteed by either Freddie Mac or Fannie Mae, and acquired by them . The problem that many homeowners run into is that they may not know whether they actually have a mortgage backed by either of these two entities. There are lists of course, but these aren’t exactly infallible. Still, they’re the best option. Many times, the refinancing bank you’re working with will be able to look this information up for you, so don’t sweat it. If they won’t, or claim they can’t, then you might want to think twice about who you’re dealing with. Obviously, you can check the lists yourself through their websites, if you wish.

Another necessity is that you must not have had a previous HARP refinance unless it meets certain specific criteria. Additionally, the loan-to-value ratio (as mentioned earlier, has to be greater than 80%. When these criteria are met, you should have no problem refinancing your mortgage at all! The process of refinancing through HARP is no more difficult than any other refinancing you might undertake, so really, it’s a no-brainer when you think about it!

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