The Home Affordable Refinance Program, or HARP, was created to let creditworthy homeowners who have too little equity to get a home loan through normal channels refinance to the best available mortgage rates. To qualify, you don’t have to demonstrate a financial hardship–in fact you should not be in default on your mortgage. To refinance with HARP, you must:
- Own a one- to four-unit home
- Have a mortgage that is owned or guaranteed by Freddie Mac or Fannie Mae
- Have made no late mortgage payments (more than 30 days late) in the last twelve months
- Owe no more than 125% of the value of your home (on the first mortgage–if the holder of the second lien subordinates its loan, the combined loan to value can be higher).
Call your Fannie Mae or Freddie Mac loan servicer about a HARP refinance if you meet these criteria. Only your servicer can tell for sure if you’re eligible.
Refinancing with a New Lender
Check with your current lender about pricing for a HARP mortgage refinance, then compare it to mortgage refinance quotes from other lenders. You can use the lender that provides the best deal, with one caveat: to use a different lender, your application must be scored by an automated underwriting service and approved. If it has to be underwritten manually, only your current lender can fund your refinance.
The other problem you might have with a different lender is mortgage insurance. If you have a mortgage insurance policy now, it can remain in force when you refinance with the same lender. If you change lenders, you have to get a new policy, and that can be problematic at high loan-to-value ratios.
Benefits of HARP Refinancing
A HARP mortgage refinance has several advantages over a regular refinance these days.
- If you don’t have mortgage insurance on your current mortgage, you won’t be required to add it, even if your equity is less than 20%.
- If you have a mortgage insurance policy, you won’t be required to add extra coverage even if your equity has decreased.
- Loan level pricing adjustments (LLPAs) are limited to two points, so if your credit score is on the low side you aren’t penalized. Without this cap your fees could easily add up to five points or even more.
- Unlike traditional refinances, you may be allowed to refinance a home that is or has recently been listed for sale.
Check with your current mortgage servicer about your HARP eligibility, shop for the best rate, then apply for your refinance and start saving money.