The HARP refinance program was created to help homeowners that have suffered a loss in their homes value as a result of the housing bubble and recession. For many people it has been the only way to refinance their home, as lower home values have meant higher loan to values. For example if you purchased a home in 2005 for $350,000 but due to area foreclosures and declining home prices the value dropped to $250,000 you could be in trouble. If you bought the home with 30% down you could owe close to $245,000 on a home that is now only worth $250,000. This can traditionally make it very difficult to refinance as the existing loan balance and closing cost would equal close to 100% of the homes current value.
The HARP loan program is the solution for borrowers that need to refinance their home but are in the difficult situation of not having enough equity to qualify for a traditional loan. Instead of focusing on the value of your home, the HARP program focuses on your ability to repay (make loan payments).
The HARP program is ideal for people who:
- Have less than 20% equity in their home.
- Have an interest rate above 5%
- Are paying their mortgage on time, and have for the past 12 months.
- Have an existing Fannie Mae or Freddie Mac loan (If you have an FHA loan consider an FHA streamline refinance instead)
- Have not used the HARP program before.
This loan program is not for people that have fallen behind on their mortgage payments but rather for home owners that have one problem – their homes value declined. The HARP program allows for lenders to focus on a borrowers ability to pay the loan payments on time, rather than the homes value.
Borrowers with interest rates over 5% or in an ARM (adjustable rate mortgage) loan should contact a mortgage lender today to find out if the HARP loan is the correct refinance solution for your needs. The program was written to expire at the end of 2013 so this option will not be available for long. Mortgage loans typically only take 45 days to close but can take up to 90 days in unique circumstances. It is a good idea to get your application in by September to allow for plenty of time to complete your HARP refinance.
Interest rates have been rising over the past couple of months. Now is the time to close a refinance before they rise any further. When looking at the risk of an expiring HARP program and interest rates, borrowers are advised to pull the trigger quickly in order to receive the maximum benefit from refinancing. A small difference in interest rates can equal hundreds on a monthly payment and once the HARP program expires borrowers may be stuck in their current loan until home values rise enough to refinance through traditional methods. Contact a mortgage banker today to complete your HARP refinance while you still have the option.
With mortgage rate trends showing us that rates will ultimately increase, Bethany understands why homeowners should utilize government programs to refinance. Since HARP has expired there have been other programs available that do similar things as HARP such as the FHA Refinance Program. Taking this survey can help you find the other programs that will surely be comparable to HARP.