The Home Affordable Refinance Program (HARP)
The Government’s HARP program is for helping homeowners that need relief from high-interest rates on their loans or those who owe an amount that is more than the house is worth. Homeowners that qualify can get their mortgages refinanced with better terms.
Let’s Jump In
Buying a house is a long-term commitment and during that time there can be lots of changes such as interest rates, housing market fluctuations and personal finances. These factors can cause rough financial hardships for homeowners
The federal government has instituted the “Make Homes Affordable” program to help homeowners get through these fluctuations. One aspect of the program is the Home Affordable Refinance Program (HARP) which helps property owners up to date with their mortgages but just need help with unrealistic interest rates or overvalued houses. It started back in 2009 and was modified in 2011 to allow for more people to qualify.
This article contains the basics of the benefits offered, how to apply and HARP requirements. To visit the government site click here.
Benefits of the Program – HARP assists owners that would ordinarily be rejected for financing in modifying their mortgage rates.
When the Loan Is Higher Than the Property Value – It’s normal for refinancing companies to reject applications when the total debt is more than what the property is worth. Owners who find themselves in this situation are the prime applicants for HARP. It targets homeowners that have a loan-to-value ratio of 80% or above. The percentage is calculated by comparing mortgage owed to the market selling price of the home. If the amount owed is lower than 80% of the home value you probably won’t qualify for HARP. For example, back in 2008, after the housing market took a dive, homeowners were in debt up to 150% above the value of the house.
Fixed Rate – Buyers that are subject to fluctuating interest rates can apply for a more stable interest rate, which should be lower.
Reduced Monthly Payments – Lower interest rates generally means paying less every month
Quick Payoffs – After the home has been refinanced and the owner opts to keep the monthly repayments the same, this will result in the home being paid off faster.
Increased Borrowing Limit – An owner can increase their borrowing up to 200% of the house’s value who qualify for the program.
Limited Expenses – There are only a few small costs related to the application process, if any.
Less Reporting – An applicant that has received a large amount of money does not need to report where it came from.
Flexibility – You are allowed to provide this to show the income you earn or a 12-month reserve to cover the total loan.
No Assessment or Cover – This is one less hurdle for the buyer and speeds up the process.
Prerequisites – Congress decided to implement certain standards
Payments Up to Date – You can only qualify if you have a near perfect payment record over the last 12 months.
Fannie Mae or Freddie Mac Mortgage – To qualify you to have to have a mortgage with one of the two mortgage companies. You can search their websites to check. A mortgage entered in before May 31, 2009. It can be the main home, a single second home or 1-4 building property for investment.
Application Process – There are some additional requirements that need to be met, which is standard for most financial agreements.
Gather Financial Information – This is the most daunting task but making sure you have all the information can save you a fortune each month. It’s well worth the effort.
Find Out If You Qualify – Read through what is required and check if you have the right criteria from the list above. If you have applied before and were rejected check again because HARP was modified in 2011.
Discuss your options with a mortgage or HARP expert. It should not cost anything and you will need assistance to fill the application.
Do the Application. Wait for the Approval. Then Close the Loan
Limitations – HARP is unable to fix really complex mortgages.
Foreclosure – If you are behind on payments or facing foreclosure, the program is unable to help.
Expiration – Unless it is approved by congress, the program will end on Sept. 30, 2017. That only allows a limited time to join the program.
Decreasing Principle – HARP is unable to lower the original amount owed for the property. It remains fixed and the refinancing only reduces the interest or lengthens the payment time.