If you don’t know about the Home Affordable Refinance Program, this might entice you to learn more: Eligible homeowners could save as much as $2,400 annually on their mortgages by participating in it, according to the Federal Housing Finance Agency.
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As of December 2015, more than 3.4 million HARP refinances have been completed — and more than 325,000 borrowers were still eligible to sign up.
Learn what the HARP program is, how to qualify and how to opt in. Next, decide if you should refinance and if so, what’s the best path to take.
What is HARP?
The Federal Housing Finance Agency, U.S. Department of the Treasury, Fannie Mae and Freddie Mac created HARP in 2009 to provide homeowners — with solid mortgage payment histories but large equity losses in their houses because of the recession — with refinancing options.
HARP has been updated since its introduction. Changes include the following:
■ The loan-to-value ratio ceiling no longer exists.
■ Certain circumstances might warrant waiving property appraisal requirements.
■ The loan eligibility date is now the date on the note, as opposed to the date when Fannie Mae or Freddie Mac acquired the loan. That change increased the pool of borrowers eligible for HARP loan rates.
■ HARP 2.0, the updated program, was launched in March 2012 to help underwater and near-underwater homeowners — those whose mortgage balances are higher than the properties’ fair market — refinance to loans with lower monthly payments.
Do you meet HARP loan requirements?
Homeowners must decide when to refinance their mortgages and meet a few qualifications to apply for this loan. Review the four essentials regarding HARP loan eligibility:
■ Your mortgage loan must be owned or guaranteed by Freddie Mac or Fannie Mae.
■ The maximum loan-to-value ratio you can have is 80 percent.
■ The mortgage must be current — you cannot have any payments more than 30 or more days due in the last six months and no more than one late payment in the past 12 months.
■ Your original loan must have closed by May 31, 2009.
If you qualify for the HARP program, you can refinance your mortgage and take advantage of lower interest rates and shorter loan terms. In addition,
if you’re in an adjustable-rate mortgage you can switch to a fixed-rate mortgage and know what your monthly payment will be for the life of the loan.
HARP program benefits
A HARP loan might give you a significant financial boost in several areas.
■ Streamline the refinance process: HARP offers a more streamlined application and approval process than traditional refinance programs because it requires less documentation.
■ Lower your refinance costs: Although you don’t need a minimum credit score to participate in the program, you might qualify, if you have one, for excellent terms such as a zero-cost refinance at the lowest current interest rate, regardless of how much your home might have changed in value. Also, you will pay no appraisal costs, and you can roll your closing costs into your new loan.
■ Refinance to a shorter-term loan: A shorter-term mortgage enables you to pay down the loan faster than a traditional 30-year mortgage. Interest rates are typically lower on shorter-term mortgages than 30-year mortgages, which might enable you to get the shorter terms but still keep your payment manageable.
■ Lower your monthly payment. Say your house is $80,000 underwater and your interest rate is 5.875 percent. If HARP refinance rates lowered your interest rate to 4 percent, you would save more than $500 each month.
■ Reduce your interest rate. HARP refinance rates are generally comparable to those of other mortgages, but if your loan is old enough to be eligible for the program, chances are today’s rates are much lower than the one you have. Reducing your interest rate can save you a significant amount of cash.
■ Stabilize your payment: Freddie Mac and Fannie Mae allow you to refinance into fixed-rate mortgages with terms from 10 to 30 years. Refinancing can help you avoid any large payment increase that comes when your ARM’s initial period ends and your interest rate goes up. Changing from an adjustable-rate mortgage to a fixed-rate mortgage will give you peace of mind because your payment will be the same every month.