HARP Refinance BenefitsMax McCoy
The Home Affordable Refinance Program (HARP) was created to assist homeowners facing debt or foreclosure by offering a refinance option with fewer requirements. Because it was intended to help those in need, there are many notable HARP refinance benefits.
The HARP program is set to expire at the end of September of this year, but the Federal Housing Finance Agency still believes that hundreds of thousands of homeowners are still eligible.
Who is Eligible?
Having flexible financial criteria while providing homeowners an option to refinance if they are underwater on your mortgage make the HARP loan quite appealing. However, it’s important to ensure that the HARP’s requirements are met before applying for a new loan.
2017 HARP criteria include:
- The current loan must be owned by Fannie Mae or Freddie Mac.
- The loan must have closed by May 31, 2009.
- The current loan-to-value must be greater than 80% (your loan amount is 81%+ of the home’s value).
- No 30-day late payments in the last 6 months.
- No more than one payment that was 30+ days late in the past 12 months. (Some lenders may require no late payments at all in the last 12 months.)
- You can’t use HARP on the same property twice.
Criteria met or not, many wonder if they would truly benefit from a HARP mortgage.
HARP Refinance Benefits
Take for example a house that was purchased in 2005 for $280,000 but is now worth $200,000 due to the housing market correction. Further, assume the homeowner owes $250,000 on the mortgage. In this scenario, the loan-to-value ratio would be 125%, and if the homeowner wanted to refinance, he would have to bring a significant amount of cash to closing to get his mortgage “above” water. Since lenders require a loan to value of 80% in order to avoid mortgage insurance, the homeowner would have to come up with $50,000 at closing in order to refinance into to a lower rate!
The good news is that if you are eligible for the harp loan program it does not matter how underwater you are on your mortgage, you can refinance into a much lower payment. In many cases without having to bring any money to closing or having to get an actual appraisal completed.
Overview of HARP Refinance Benefits:
- No equity required
- No appraisal required
- No minimum credit score
- No mortgage insurance
- Reduced documentation
- Flexible underwriting guidelines
- Subordination of 2nd mortgage OK
- Lower closing costs than other loans
- Build equity faster by shortening your term
Overall, HARP has many benefits for those who qualify.