How to Do A HARP Mortgage Refinance
Refinance Your Home With A HARP Loan
If you currently owe more money than what your home is actually worth and you have a high interest rate, you should definitely consider a HARP mortgage refinance and take advantage of low mortgage rates before an increase occurs. I was able to successfully refinance my home through HARP and I'm saving close to $400 per month with my new payment.
HARP (Home Affordable Refinance Program) is a government mortgage program that began in 2009. It's also sometimes called the Obama refinance plan or Obama mortgage. The latest revised version of the program, HARP 2, includes updated guidelines which makes it easier to qualify.
The purpose of the program is to allow responsible homeowners to refinance an underwater mortgage. Sadly, without the program, there is no way to refinance if you owe more than what your home is worth, in most cases.
In order to be eligible for HARP, you must meet the following guidelines:
- No late payments. You must have a record of paying your mortgage on time. HARP isn't a modification program for people in foreclosure. It's meant for responsible homeowners with an underwater loan.
- Your home purchase took place before June 2009.
- Your home loan must be backed by Freddie Mac or Fannie Mae. Call your current loan holder to find out or visit the websites for Freddie Mac or Fannie Mae to run a search with your home address.
- Your current home loan isn't a jumbo loan.
Those are a few guidelines that determine if you're eligible, but like a regular refinance, the lender will look into credit history, income, debt to income ratio and so on. The first thing to do is to ask your current lender if they participate in the program and what rate they can give you. If you do the refinance through your current lender, the process will go much faster and it will probably be cheaper.
My refinance was completed about one month after the initial phone call. I went through the same lender again, which made it a lot easier and faster. I didn't have to provide documentation because they already have my information.
If you have excellent credit, that will definitely work to your advantage. If you're self-employed, the process might take more time because you'll probably have to produce additional paperwork and tax returns to prove income, but that depends on the lender and your financial status.
Compare HARP Mortgage Rates
First, confront your current lender about HARP 2, or the bank that services your checking account. Not only is the process faster if you go through your bank, but they'll probably give you a discount on the closing costs if you open another account with them. Most lenders participate in the program now and will help you refinance your home if you qualify.
Shop around and compare several rates like you would with a regular refinance. Sites like Bankrate.com are good for rate comparison. You can enter your zip code to get a list of the top local banks.
Stick with banks that have good customer service and no complaints. Avoid online lenders like Quicken Loans. I have heard nothing but bad stories about that company. Talk to a local bank first. That way, you can see someone in person if you have a question or problem. Most banks can help you with a HARP refinance, but check reviews and complaints online. You'd be surprised what you find.
I found most HARP rates to be similar, but some banks were asking way too much for closing costs. I also called credit unions and found that most of them didn't participate in HARP. I'm not sure if it's true, but a loan officer told me that HARP rates don't fluctuate as much as rates through a regular non-government provided refinance option. Either way, shop around.
The refinance process doesn't have to be annoying and disappointing. An experienced loan officer should be able to tell you up front if they can do a HARP mortgage for you, or not. It's really important that they tell you up front before you pay for an appraisal. If they can help you with your refinance, they should provide you with a good faith estimate on paper and a rate lock in case mortgage rates increase before your closing day.
It's also important to ask if you'll have to pay PMI (private mortgage insurance) on your new loan. I believe, in some cases, it's possible to not have to pay PMI, after the refinance, but I think it depends on the loan to value ratio. Ask the lender.
Right now is the perfect time to refinance if you're interest rate is too high and your loan amount is greater than the value of your home. Mortgage rates are still at all time lows, but that won't last for long.