HARP Mortgage Loans
The HARP program was devised by the Federal Government in early 2009 to help home owners who were underwater, or owed more on their mortgage than their house was worth. Not all homeowners are eligible for HARP as there are several strict rules to be met.
Rules of HARP
- You must have a Fannie Mae or Freddie Mac mortgage, sold to either entity on, or before, May 31, 2009.
- You cannot have done a HARP refinance previously unless you have a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
- You must be current on your loan with no late payments in the last six months or only one late payment in the last 12 months.
- You must be able to prove you have the ability to continue payments and
- Refinancing will improve your long term stability in the loan.
Like any other mortgage loan, HARP loans involve paying costs for the application, processing, appraisal, title search and other items related to the loan process. While loan-to-value has no limit for fixed rate loans, adjustable HARP loans have a limit on LTV of 105%.
HARP Loan Documentation
As with all mortgage loans, you will need documentation to begin the HARP loan process. So start by assembling the following:
- Your most recent 30 days of pay stubs if you receive them, or documentation of other sources of income.
- Your two most recent income tax returns
- Information about any second mortgage on your home
- Minimum monthly payments and balances on your credit cards
- Monthly payments and balances and on all your other debts
Rates for HARP Loans
As with regular mortgage loans, rates for HARP loans will be subject to market rates available at the time of refinance and the loan will include points and fees. Two protections for the HARP loan client stipulate that refinanced loans may not include prepayment penalties nor balloon payments.
How Shortening the Term Helps You
Shorter term mortgages usually have significantly lower rates than traditional 30 year mortgages, allowing you to pay down the loan faster. Your loan may reach alignment with your property value in a much shorter time span, allowing you to explore other options and reducing the risk to the lender. The drop in rates from your present mortgage may only require a small increase in payment, but a much shorter time to emerge from an underwater position.
As you would with any other financial decision, compare your new interest rate, mortgage payment, and the amount that you will pay over the life of the loan to your current loan terms to make sure refinancing is right for you. HARP will not reduce the amount you owe but is intended to help you get into a more affordable loan and re-align your equity position.