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Upside Down in Your Mortgage?
If you have good mortgage qualifications but are upside down in your home (meaning you owe more than your home is worth), you still may be able to take advantage of today’s lower interest rates through the Home Affordable Refinance Program, or HARP.
What is HARP?
HARP, also known as the DU Refinance Plus program, was created in response to falling home values to help creditworthy homeowners get out of risky loans and lower their mortgage payments even if they owe more than their home is worth. If you have negative equity but you meet the basic eligibility criteria below, you may still be able to refinance your home loan and take advantage of today’s historically low interest rates.
The following is a rundown of the basic eligibility requirements of HARP:
- Your loan must be owned by Fannie Mae or Freddie Mac. Note that you can have a Fannie or Freddie loan even though you’re sending your mortgage payment to a servicer such as Chase, B of A, or Wells Fargo. You can determine if your loan is owned by Fannie or Freddie using online lookup tools here and here.
- Your loan must have been originated and sold to Fannie Mae or Freddie Mac on or before May 31, 2009. If you got your loan after May 2009, you are not eligible.
- You must have good credit. HARP is designed only for borrowers with good credit histories and qualifications, so if you’ve got recent mortgage late payments or low credit scores, you likely will not qualify.
The following are some of the great features of HARP:
- Competitive interest rates. HARP interest rates often are comparable to the best interest rates on the market.
- No loan-to-value cap (as of November 2011). In other words, you can owe 200%, 300%, or 400% (or more) of the value of your property and still potentially qualify.
- No mortgage insurance required. Normally, when your loan-to-value is over 80%, you’re required to carry mortgage insurance. Not so with HARP!
- No appraisal required in many cases.
- Investment properties are eligible as well. Even better, HARP limits many of the pricing adjustments that can make investment property mortgages more expensive. If you’re not familiar with Fannie Mae loan level pricing adjustments, or LLPAs, check out my post about them here.
What HARP Is Not
To be clear, HARP is not a loan modification program, so do not confuse it with HAMP, or the Home Affordable Modification Program. Under HARP, you are refinancing your loan the same way you would any other refinance. The only difference is that you fall under a set of lending guidelines that allows for loan-to-value ratios above 100% of the value of your home.
No Second Mortgage Consolidation
One important limitation to note with the HARP program is that you will not be able to consolidate a first mortgage with any subordinate financing. If you have a second mortgage on your home, you can refinance the first mortgage and resubordinate the second (assuming the second lien holder agrees).
Not Upside Down In Your Loan?
Many homeowners have taken advantage of the HARP program even though they’re not upside down in their homes. If you meet the above criteria but have equity in your home, the HARP program can still be a great way to refinance because it often allows you to skip many of the hassles of a normal refinance.
Find Out More
If you’d like to find out more about the Home Affordable Refinance Program, give me a call or request a call back here. I’m happy to run the numbers and see how a HARP refinance could benefit you. I look forward to working with you!