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HARP is a government program that helps mortgage borrowers with little or no equity in their homes refinance into more affordable mortgages. The program is designed to benefit homeowners who have made their mortgage payments on time, but who are unable to otherwise refinance because of the amount that they owe. Homeowners who owe more than 80% of their home's price are eligible, as long as their mortgage is owned by Fannie Mae and Freddie Mac.
The Home Affordable Refinance Program, or HARP, was started by the government in 2009 to help underwater homeowners refinance their mortgages. For homeowners who owe more on their mortgage than their house is worth, or whose mortgage amount is more than 80% of their home value, HARP provides a way to switch into a more affordable loan. Loans financed through HARP have low interest rates and low closing costs, and require no private mortgage insurance.
For eligible homeowners, refinancing a mortgage through HARP allows for lower monthly payments. The Federal Housing Finance Agency, or FHFA, estimates that homeowners who refinance through HARP save an average of $189 per month on their mortgage payments. The benefits of refinancing through HARP include:
- No mortgage insurance
- Reduced closing costs and no appraisal
- A fixed rate mortgage with a low interest rate
It's important to note that the deadline to apply for HARP is September 30, 2017. After HARP is discontinued, a new refinance program will be launched, which will be targeted solely towards those whose mortgage amount is more than 97% of their home's value, or who owe more than their home is worth. Like for HARP, the new program will have no credit score or appraisal requirements. Borrowers who already have HARP loans will not be eligible for the program.
Eligibility Requirements for HARP
To qualify for HARP refinancing, the FHFA requires that mortgages were made before June 1, 2009, are conventional loans, and have not been delinquent—i.e., paid late—in the past six months. Lenders who participate in the HARP program often require a 620 credit score minimum, though the official program guidelines have no credit score minimum.
Homeowners who use HARP should expect to have their income, employment and credit history verified. You can use these Fannie Mae or Freddie Mac look up tools to see if your mortgage qualifies for HARP. For those with FHA rather than conventional mortgages, FHA streamline refinancing is one option to make your mortgage more affordable.
HARP in its current form is also known as "HARP 2.0." In contrast to the first version, the new HARP no longer has a ceiling for loan-to-value ratio. Previously, the maximum LTV for HARP eligibility was 125%. Today, borrowers can refinance regardless of how much they owe. This means that a homeowners who owes $275,000 for a home with $200,000 can still qualify for HARP.
Mortgages that qualify...
- Are conventional loans originated before June 1, 2009
- Have an outstanding mortgage amount more than 80% of the home's value
- Have had no delinquencies in the past six months and only one in the past 12 months
Benefits of HARP
As a mortgage relief program, HARP provides a lifeline for homeowners struggling with massive amounts of debt. For those whose home value has declined in recent years, or simply hasn't recovered since historical peaks in the mid 2000s, it's common to have an extremely high outstanding mortgage balance. By receiving a lower interest rate and requiring homeowners to pay no mortgage insurance, HARP can make mortgage payments a lot more affordable. This is in contrast to most mortgages before refinancing with HARP, which require private mortgage insurance until 20% equity in the home is reached.
Additionally, HARP is meant to be a streamlined process, so minimal paperwork is required. There is no appraisal necessary in most cases, and loans do not need to be underwritten. This allows for a quick refinance process that can be completed in three to four weeks. However, if you have a second mortgage on your home, you might encounter delays while the lender of the second mortgage signs off on the refinance.