Can a HARP Mortgage Loan Help Me?
You might have heard about HARP, (Oftentimes called the Obama Loan) but what is it, and can you reap the benefits? HARP, or the Home Affordable Refinance Program, is a government program designed to help borrowers who otherwise would not be able to obtain a home refinance loan under conventional guidelines. In fact, most traditional lender guidelines have been changed or removed entirely, to allow for a more streamlined process from start to finish.
How do I know if I qualify for HARP?
The Home Affordable Refinance Program has strict criteria for those who qualify and those who do not. One of the most telling signs, however, is when you’ve purchased a home or when you last refinanced. If you purchased or refinanced your home prior to May 31st, 2009 you may be eligible for HARP provided that either Fannie Mae or Freddie Mac owns the loan on your home. Good news is that the government owns or insures three out of every five home loans. According to statistics from the Urban Institute, there are still an estimated 300,708 loans out there which meet the requirements for HARP refinancing.
What does HARP do for me?
As mentioned above, HARP takes most conventional guidelines and stretches them to allow those who normally can’t secure a home refinance loan, do just that. For many borrowers just refinancing their home can have the following benefits:
- Lower monthly payments
- Reduce interest rates
- Secure a fixed-rate that will never rise/fall with the market
- Build equity more quickly with a shorter term
Another benefit of HARP is that appraisals are not usually required. Typically, for a home refinance loan, an appraisal is an out of pocket expense which could cost as much as $500.00! Because HARP mortgages do not normally require this, the lower expenses can be an advantage for the consumer. Not requiring an appraisal helps the homeowner in another way as well; the time saved on not needing the appraisal speeds up the refinancing process, allowing the refinance to be funded in as little as 15 days!
Can I use my Home Equity with HARP?
Unfortunately, HARP is designed for those with little to no equity in mind. Because of this HARP applies strictly to those who wish to refinance their homes. It does not allow debt consolidation or cash out from the home. Thankfully, those who qualify for HARP may also qualify for one of those two programs which could yield a bigger benefit.
Other Benefits of HARP:
One of the greatest features of HARP is that there is now no underwater limit with the program. This means that if home values in an area had diminished well below what is owed on the property, the borrower may still be able to refinance. Previously, there was a 125% loan-to-value (LTV) ratio on the program but that requirement that has been waived.
Another benefit is that there is no mortgage insurance for HARP loans. Mortgage insurance can be a costly fee which impacts monthly spend. No mortgage insurance means that the program is almost always a better choice for those who qualify than a conventional or FHA refinance!
Should I refinance using HARP?
The best way to know what mortgage loan program is best for your needs is to speak with a licensed expert. Know your options so you can make an informed choice.