Refinancing when the value of your home has declined.
Many people have heard of the Home Affordable Refinance Program but have no idea what it is or if they qualify. With home values declining over the past several years many home owners have been left in difficult situations. They need to refinance but have been unable to do so because their Loan to Value (what is owed vs. the value of the home) is too high. When this happens good, hard working people that pay their mortgage on time, are left unable to complete a necessary refinance.
The HARP loan program was created to help people in this situation. For example a home may have been appraised at $250,000 in 2005 with a home loan of $200,000 (80% Loan to Value) but now that same home is only worth $210,000 making the Loan to Value 95%. Since the Loan to Value (LTV) is higher many lenders may be unwilling to refinance the loan because a higher LTV represents a greater risk to the lender. In this situation the HARP loan program is able to step in.
HARP Loan Eligibility Requirements
- 1. The current home loan must be guaranteed by Freddie Mac or Fannie Mae.
- 2. This must be the first time refinancing through the Home Affordable Refinance Program.
- 3. The current mortgage loan needs to have been sold to Freddie Mac or Fannie Mae prior to May 31, 2009. If you took out a home loan after this time you would not qualify.
- 4. The Loan to Value must be greater than 80%. If your LTV is under 80% you should speak with a mortgage lender about a conventional refinance.
- 5. The loan must be current with no late payments during the past twelve months. This is extremely important. If you are current now but think it will be hard to pay on time in the next couple of months contact a mortgage lender immediately. If you wait until you have missed a payment it will be too late.
If you meet all of these guidelines you should contact some HARP lenders to further discuss your lending needs and eligibility. They will go over your options with you to determine if you qualify for a HARP loan and if that is the best refinance option for you. If you are not elgible for this program there may be another government mortgage program to assist you such as the FHA Streamline refinance program. FHA Streamline offers the same easy refinancing as HARP loans but for FHA insured mortgages.
Simply because a loan program is available does not mean that is the best solution for your individual needs. A mortgage lender works hard to get you the lowest possible mortgage rates and terms so that you can save the most money.
