The gov recently announced some great changes to the Home Affordable Refinancing Program (HARP). The updates to the program are aimed at those who have spent the years since the recession began keeping up with their mortgage payments as others walked away (read why “walking away” is a misnomer here and here) from their houses even though they can make the payments. The idea here is to help millions more homeowners save some money on their house payments by helping them take advantage of today’s historically low interest rates, even if they don’t have any equity to qualify for a standard conventional mortgage.
1. Your loan must be guaranteed by Fannie Mae or Freddie Mac.
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2. Your loan must have been acquired by Fannie or Freddie before April 1, 2009.
3. You haven’t already refinanced under HARP (or if you have it was between March and May of 2009).
4. Your Loan-To-Value ratio must be higher than 80%. This just means you have less than 20% equity. If you have 20% equity or more a standard conventional refinance is what you need.
5. You haven’t been late with a mortgage payment in the last six months. In the last year, you haven’t been 30 days late more than once. Because the program will last through Dec. 31, 2013, there’s still time for borrowers to get on track.
6. There must be a tangible benefit. You must end up with a lower payment or trade in an ARM (adjustable) for a fixed rate mortgage.
What about my home’s appraised value?
The biggest challenge to getting a HARP loan up until this point was, even though appraisal guidelines were relaxed, you still had to be close to having some equity. You could be underwater but not that much. The good news is some mortgage holders will be eligible no matter how much they owe or how much the house is worth when Fannie and Freddie rolls out the Property Inspection Waiver. For others, there is still a Loan-To-Value ceiling.
If you have a fixed-rate mortgage with a term of up to 30 years, there’s no maximum LTV ratio, meaning there’s no maximum amount you can owe on your home if you qualify for the Property Inspection Waiver.
If you have a fixed-rate loan but the term is over 30 years (very rare), you can only owe 105% of what the house is worth.
Do you have an adjustable rate loan? As long as you didn’t sign up to pay on it for more than 40 years, or fewer than 5, you can owe 105% of what your house is worth.
Have a recent bankruptcy or foreclosure?
The standard waiting period has been removed for folks who have those blemishes on their credit histories. You still have to qualify for the loan but a recent foreclosure or BK won’t automatically disqualify you for a refinance.
When can I apply?
The program begins on December 1st however many of the changes that will help a lot of people won’t roll out until next year. Of course I’ll keep everyone updated on the program as it rolls out, this is about to help A LOT of people save thousands on their mortgage payments and also give a little boost to Sacramento area real estate values as it saves some people from losing their home.