If you have sufficient equity in your home and are having trouble making payments, you may want to refinance with today's attractive interest rates. However, keep in mind that many lenders are being cautious and reducing their level of risk due to economic circumstances and national declines in real estate values. This means that most lenders will not refinance your loan to any more than 80% of market value. For example, if your home is worth $500,000, do not expect to be able to refinance your loan to any amount greater than $400,000 (80%) unless you go through one of the government sponsored refinance programs outlined below.
Home Affordable Refinance Program (HARP)
The Home Affordable Refinance Program is designed to assist you as a homeowner in refinancing your mortgages even if you owe more than the home’s current value. The primary expectation for HARP is that refinancing will put you in a better position by reducing your monthly principal and interest payments or by moving you from a more risky loan structure (such as interest-only or short-term adjustable rate mortgage) to a more stable loan structure (such as a fixed-rate mortgage).
Eligibility Requirements:
Freddie Mac - http://www.freddiemac.com/mymortgage
Home Affordable Refinance Program (HARP)
The Home Affordable Refinance Program is designed to assist you as a homeowner in refinancing your mortgages even if you owe more than the home’s current value. The primary expectation for HARP is that refinancing will put you in a better position by reducing your monthly principal and interest payments or by moving you from a more risky loan structure (such as interest-only or short-term adjustable rate mortgage) to a more stable loan structure (such as a fixed-rate mortgage).
Eligibility Requirements:
- You are the owner-occupant of a one to four unit home.
- The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac. If you are unsure, please check the following sites to determine if you are eligible.
Freddie Mac - http://www.freddiemac.com/mymortgage
- At the time you apply, you are current on your mortgage payments ("Current" means that you have not been more than 30 days late on your mortgage payment in the last 12 months; or, if you have had the loan for less than 12 months, that you have never missed a payment).
- The amount you owe on your mortgage does not exceed 125% of the current market value of your property.
- You have a reasonable ability to pay the new mortgage payments.
- The refinance improves the long term affordability or stability of your loan.
If you meet these requirements, you should contact your loan servicer and request a HARP application.
FAQ:
1. The Home Affordable Refinance Program (HARP) is similar to the Home Affordable Modification Program (HAMP). How should I determine whether a refinance or modification is best for my situation?
HARP addresses the problem faced by millions of homeowners who have been unable to take advantage of low mortgage rates to refinance because their property value has declined. The HARP program is intended for you if you 1) would like to reduce your monthly payments, 2) are current on your payments at the time of refinance, and 3) have not been delinquent by more than 30 days during the past 12 months. HAMP is intended to prevent foreclosure for homeowners in default or in imminent danger of default, and has clear guidelines regarding qualification and terms (see Loan Modification). The HAMP program is intended for you if you do not have the ability to make your mortgage payments, even with a refinance. To be eligible for HAMP, you are required to document a financial hardship and represent that you do not have sufficient liquid assets to make your monthly mortgage payments.
2. Who is my loan servicer?
Your loan servicer is the financial institution that collects your monthly mortgage payments and is responsible for the management and accounting of your loan. Many loans are owned by groups of investors and these investors hire loan servicers to interact with homeowners (i.e. you) on their behalf. If you have questions about your loan, or are behind on your payments, you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.
3. Will refinancing lower my payments?
Maybe. The objective of a refinance under HARP is to provide you the opportunity to get into a new mortgage with better terms. If your mortgage interest rate is higher than the current market rate, you should see a reduction in your monthly payments.
FAQ:
1. The Home Affordable Refinance Program (HARP) is similar to the Home Affordable Modification Program (HAMP). How should I determine whether a refinance or modification is best for my situation?
HARP addresses the problem faced by millions of homeowners who have been unable to take advantage of low mortgage rates to refinance because their property value has declined. The HARP program is intended for you if you 1) would like to reduce your monthly payments, 2) are current on your payments at the time of refinance, and 3) have not been delinquent by more than 30 days during the past 12 months. HAMP is intended to prevent foreclosure for homeowners in default or in imminent danger of default, and has clear guidelines regarding qualification and terms (see Loan Modification). The HAMP program is intended for you if you do not have the ability to make your mortgage payments, even with a refinance. To be eligible for HAMP, you are required to document a financial hardship and represent that you do not have sufficient liquid assets to make your monthly mortgage payments.
2. Who is my loan servicer?
Your loan servicer is the financial institution that collects your monthly mortgage payments and is responsible for the management and accounting of your loan. Many loans are owned by groups of investors and these investors hire loan servicers to interact with homeowners (i.e. you) on their behalf. If you have questions about your loan, or are behind on your payments, you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.
3. Will refinancing lower my payments?
Maybe. The objective of a refinance under HARP is to provide you the opportunity to get into a new mortgage with better terms. If your mortgage interest rate is higher than the current market rate, you should see a reduction in your monthly payments.
4. Will refinancing under HARP reduce the amount that I owe on my loan?
No. The objective of refinancing under HARP is to help you get into a more stable or more affordable loan. Refinancing will not reduce the amount you owe on your mortgage or any other debt you owe.
5. How will I know if a refinance under HARP will improve the long-term affordability or stability of my loan?
When you submit a refinance application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement"that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, refinancing may not be right for you.
6. What are the interest rate terms of a refinance under HARP?
The interest rate will be based on market rates in effect at the time of the refinance and you will be subject to any associated points and fees quoted by your lender. Interest rates may vary from lender to lenders and over time as market rates adjust. The refinanced loans must have no prepayment penalties or balloon payments.
7. How do I apply for a refinance under HARP?
Call your mortgage lender, or any lender approved to do business with Fannie Mae or Freddie Mac, and ask for a Home Affordable Refinance application. The phone number is on your monthly mortgage bill or coupon book.
8. I am delinquent on my mortgage. Will I qualify for a refinance under HARP?
No. If you are currently delinquent or have been more than 30 days overdue during the past 12 months, you do not qualify for a HARP refinance. Contact your loan servicer to see if a modification under the Home Affordable Modification Program is an option.
No. The objective of refinancing under HARP is to help you get into a more stable or more affordable loan. Refinancing will not reduce the amount you owe on your mortgage or any other debt you owe.
5. How will I know if a refinance under HARP will improve the long-term affordability or stability of my loan?
When you submit a refinance application, your lender will give you a "Good Faith Estimate" and a "Truth in Lending Statement"that includes your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, refinancing may not be right for you.
6. What are the interest rate terms of a refinance under HARP?
The interest rate will be based on market rates in effect at the time of the refinance and you will be subject to any associated points and fees quoted by your lender. Interest rates may vary from lender to lenders and over time as market rates adjust. The refinanced loans must have no prepayment penalties or balloon payments.
7. How do I apply for a refinance under HARP?
Call your mortgage lender, or any lender approved to do business with Fannie Mae or Freddie Mac, and ask for a Home Affordable Refinance application. The phone number is on your monthly mortgage bill or coupon book.
8. I am delinquent on my mortgage. Will I qualify for a refinance under HARP?
No. If you are currently delinquent or have been more than 30 days overdue during the past 12 months, you do not qualify for a HARP refinance. Contact your loan servicer to see if a modification under the Home Affordable Modification Program is an option.
