Need some help refinancing? Try HARP

Posted by  on Apr 18, 2014

Homeowners who have little or no equity have a hard time qualifying for a conventional refinance, but the federal government's Home Affordable Refinance Program (HARP) offers a solution for some owners to take advantage of today's lowest mortgage rates. The HARP program, first introduced in 2009 and expanded in 2011, has helped more than 3 million homeowners refinance in spite of owing more on their mortgages than the value of their homes. While the housing market has recovered in many locations and more homeowners return to positive equity every month as values rise, there are still plenty of homeowners who are under water on their mortgages and even more who have less than five percent in home equity. Generally, lenders require at least ten percent in home equity for a refinance, although some will approve a refinance with lower home equity. According to CoreLogic, a provider of residential property data, nearly 6.5 million homes -- or 13.3 percent of all residential properties with a mortgage -- were still in negative equity at the end of 2013.

The HARP program ends December 31, 2015.

HARP eligibility

If you've been turned down for a refinance because of a lack of home equity, see if you meet the requirements of a HARP refinance:

·Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. You can check this on each company's website.

·Your mortgage must have been sold to either company before June 1, 2009.

·Your loan can't have been refinanced under HARP previously (with the exception of a Fannie Mae loan refinanced between March and May 2009).

·Your loan-to-value ratio must be greater than 80 percent -- meaning you have less than 20 percent in home equity.

·You must be up to date with your payments and have made all payments on time for the past 12 months.

HARP benefits

The main reason most homeowners opt to refinance is to take advantage of lower mortgage rates, but you may also be interested in refinancing to shorten your loan term to 20 or 15 years or to switch from an adjustable-rate mortgage to a fixed-rate loan. If you refinance into a 30-year loan, you're likely to lower your monthly housing payments; but if your goal is to rebuild your equity more quickly, then a shorter loan term with similar or possibly higher payments could be beneficial.

Most lenders don't require an appraisal for a HARP refinance, but you will find differences in the loan products and loan-qualification guidelines from one lender to another. You can start by contacting your current lender to ask about a HARP refinance, but you should also contact one or two other lenders to compare interest rates and costs to find the best refinance terms.


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