After the last dip in the real estate market, home prices fell, and many mortgage loan borrowers found themselves underwater. When interest rates decreased, those who owed more on their mortgage than the current value of their home were unable to secure refinancing. To rectify this situation and help homeowners who continued to pay their mortgages on time through a challenging environment, the government created the HARP loan, available through the Home Affordable Refinance Program.
Why HARP?
Homeowners who purchased their homes prior to the downturn in the real estate market may have paid more than their house is currently worth and financed at higher interest rates than those available today. Refinancing would generally not be available to homeowners whose home values have fallen below what they owe on their mortgage. HARP provides the opportunity for these borrowers to refinance and take advantage of today’s lower interest rates. HARP loans will not erase the principle amount that you owe on your home, but the lower interest rate can decrease your monthly payment and make your home more affordable. You can also shorten the term of your mortgage through HARP, enabling you to pay off your loan faster.
Benefits of a HARP loan
The goal of HARP is to make homes more affordable for borrowers. Besides lowering borrowers’ interest rates, they program may also allow participants to transition to a more stable mortgage product, for example, from an adjustable-rate mortgage to a fixed-rate mortgage. Under the HARP program, you can refinance your mortgage loan even if your home has fallen steeply in value. The application process is streamlined, and sometimes an appraisal is not needed. HARP loans usually have lower closing costs, and mortgage insurance is not required. Also, underwriting guidelines tend to be more favorable than those required for a regular refinance.
Are you eligible for a HARP loan?
HARP covers loans owned or guaranteed by Freddie Mac or Fannie Mae. You can check the official websites to determine if your loan is eligible. Any mortgage loan originated on or before May 31, 2009, with a current loan-to-value ratio of greater than 80 percent may be considered for refinancing under HARP. You must be current on your mortgage with no late payments in the last twelve months. Finally, you may only take advantage of HARP one time, so if you’re already refinanced a home under this program, you may not do so again.
If your mortgage is underwater and you’d like to refinance, check with your lender about the availability of HARP loans. Interest rates are still below historical norms, and HARP is currently set to expire in December of 2015.
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