The Federal Housing Finance Agency (FHFA) has announced that they will be extending HARP through the end of 2018. What does that mean for you? Take a look at the information below that explains what HARP is and what it could mean for you.
HARP, or the Home Affordable Refinance Program, was created in 2009 due to the declining housing market. People who owed more on their loan than their home was worth often abandoned their homes and mortgages before HARP was created. This federal program was created to help homeowners work with most lenders if they owe more on their home than its current market value, so long as the loans are held by Fannie Mae or Freddie Mac.
Through this program, you can lower the principal, interest rates, and other relevant financials. By doing this, you can drastically lower your monthly payment and stay in your home, avoiding a “short sale” or a foreclosure.
If you don’t know who owns your current loan, you can talk to a HARP lender who will check to see if you’re eligible for the HARP program. They can also go over the program in greater detail, answering any questions you may have. You’ll be able to compare interest rates through different lenders before you make the decision of which lender to work with as well as your ultimate refinance option.
The home loan experts at Mortgage Advisor are here to walk you through every step of the way. To talk with a lender and see if you qualify for a HARP refinance, fill out our quick 1-minute form to have a Mortgage Advisor contact you.
Benefits of a HARP LOAN
HARP loans that are refinanced under the program typically have lower interest rates and principals. As time goes on, you’ll reduce your debt while increasing equity through this program. Since your new, owner-friendly mortgage has been created to help homeowners, you will find yourself with more money available to put into savings while still covering all of your loan obligations.
Community Property Value
Time can wear down any community or block of homes. Combine that with the recent economic depression and you might have found yourself in a rundown or abandoned neighborhood with rapidly declining property values. But, with HARP financing, you can refinance an upside-down mortgage, creating a healthier, more manageable monthly mortgage payment that also increases your equity. With the money you’ll save every month, you can stop worrying about the bills and use some of that money to repaint the house, spruce up the yard, and make those much-desired changes to the kitchen. The HARP solution allows you to rebuild equity into your property while lowering your monthly bills. By doing this, you can go from a toxic loan situation into the complete opposite.
As more and more people in your area use a HARP loan, the values on your street, block, and in your community, will rise, creating a safety net of equity in your home.
Maximum LTV Thrown Out
With HARP’s initial launch, many homeowners did not qualify for the program. The program was revised in 2011 to change the Loan-To-Value (LTV) ratios used on the loan to help people qualify and create a better mortgage for the homeowner.
With the changes to the law, HARP 2.0 throws out the old rule of maximum LTVs of up to 125% of the home value as long as you are signing up for a fixed term loan. Since that limit is gone, many more people qualify under the program than ever before. If you decide to use an adjustable rate mortgage (ARM) instead, the LTV is capped at 105%. Since ARMs cannot as easily qualify, it is rarely chosen by home buyers in this program.
A traditional refinance comes with quite a few, expensive fees. Under HARP, the traditional refinance loan process and closing costs are streamlined and overall costs are cut down for the homeowner’s benefit. For instance, there’s no required appraisal, which is one of the major fees. Instead, the lender will do an overall market assessment of similar homes in the area, as well as historical estimates, and base the value of the home off of that.
Since HARP 2.0 has eliminated the cap limit on LTV, a super-accurate home evaluation isn’t important and the appraisal is unnecessary.
Second Home Relief
Investors and people who own a second home felt financial pain during the economic recession. Their properties often plummeted in value, while their payments stayed the same, meaning they were essentially paying only interest and never developing any equity in their homes. The declining market also meant homeowners couldn’t rent out properties to cover the cost of the current mortgage. With HARP 2.0 in place, this situation can be easily remedied, allowing homeowners and investors an option to lower their monthly costs and keep investments profitable.
To talk with a lender and see if you qualify for a HARP refinance, fill out our quick 1-minute form to have a Mortgage Advisor contact you.