For homeowners stuck in situations where the market value of their homes has fallen far below what they owe on their mortgages, new additions to the Home Affordable Refinance Program, the HARP program, are bringing hope.
Called HARP 2.0, these changes allow more borrowers—namely those excluded from the first version of HARP because they’re loan-to-value (LTV) ratios were too high—to refinance their home loans and secure lower interest rates and fees. In addition, HARP 2.0 also introduced a shorter HARP application process, without required appraisals and with fewer lender restrictions.
Applying For a HARP Loan
If you’re applying for HARP 2.0, your first step is to confirm your eligibility. You do this by confirming through the Fannie Mae or Freddie Mac websites that your loan was originated, owned, or guaranteed by one of these organizations and that your loan was closed on or before the HARP loan close deadline.
Using your credit report, you also need to verify that you haven’t had any late mortgage payments within the previous six months and not more than one payment 30 days late or more within the last 12 months. Often, if it is found a borrower does not meet these requirements, the borrower will have to wait until they meet these criteria.
Other questions the borrower will have to answer satisfactorily at the beginning of the HARP application process include:
- Is the borrower gainfully employed?
- Will a HARP refinance either shorten the term of their loan or bring down their monthly payments?
- Will the borrower use the property being refinanced as their primary residence?
The HARP Refinance Process
Once the HARP refinance mortgage application is submitted, the lender’s examination of the borrower’s financial well-being begins, including a deep dive into their payment history, current debt, and credit score. Also, lenders have been known to require LTV ratios that are more stringent than those required by the government. Borrowers looking to use a HARP refinance can expect to go through these steps:
Step 1: Pre-application submission
Contact information, demographic information, information about your current mortgage payments—this is what you can expect from this relatively simple application. You can also expect to provide some information about any assets and income you have.
Step 2: Credit check and preliminary approval
After checking your credit report, the lender can often ask the borrower to give some clarification regarding what they find in regards to debts and income. As implied, this is where the lender decides to give preliminary approval to the borrower—or not.
Step 3: 1003 form submission and supporting documentation
The 1003 form, one of the several documents tied into the HARP application process, requires the borrower to provide a number of documents to determine financial health—like W2 forms, pay stubs, and bank statements—and sign several disclosures.
Step 4: Submission of application and second mortgage fees
At this step, the lender and the borrower submit the application. However, for borrowers with second mortgages, this is often the step where they have to pay additional processing fees. Also, to avoid any surprises, know that while you are waiting for news of your HARP approval, it’s not uncommon for any home equity line of credit (HELOC) to be temporarily frozen.
Step 5: Additional documentation
Your days of providing additional documentation might not be over. While doing your due diligence at the beginning of the process to provide the right documentation will lessen the odds of this happening, lenders are known to request additional documentation, which can, in turn, affect your ability to lock in a lower interest rate in time.
Step 6: Approval of the loan and acceptance signature
The waiting period can range from just a couple weeks to a couple months, but it can be worth the wait. Once your loan is approved, the official documents are printed and you will sign several documents. With HARP loan approval granted, you can move forward with making the refinance a reality, complete with lower monthly payments and lower rates.
Learn more about the HARP application process. Fill out our quick 1-minute form to have a Mortgage Advisor contact you.