Monday, October 15, 2012

Upside Down? Refinance with HARP 2.0

Are you upside down on the mortgage for your home, 2nd home or investment property?  Would you like to take advantage of the low interest rates but assumed you couldn't?

My husband and I own a rental property in N Aurora.  The loan was an "interest only" loan and the property is worth about $10,000 LESS than what we owe.  We have been frustrated wishing we could refinance but not being able to afford to bring that much money to the closing table.

Earlier this summer I heard about the HARP 2.0 program.  HARP stands for Home Affordable Refinance Program.
"Home Affordable Refinance addresses the problem faced by millions of homeowners who have been unable to take advantage of low mortgage rates to refinance because their property value has fallen. The loan modification program is intended to prevent foreclosure for borrowers in default or in imminent danger of default, and has clear guidelines regarding qualification and terms."

 We have been approved for a new loan at a lower interest rate for a monthly payment that is slightly less than what we were paying for the interest only portion of our previous loan.  No appraisal was required, either.  I can't explain what a relief it is to know that we no longer have to worry about the payments on that property going up.  Our rent barely covers the mortgage payment and other expenses and any increase could easily put us in a serious financial bind.

For specific details about the program you can go to http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx, then contact your mortgage broker or current lender and ask for help getting the refinance started.

Here is a brief summary of the eligibility requirements:


  • The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae. You can check to see if your current mortgage is eligible by going to the Freddie Mac and/or Fannie Mae  websites.
  • The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  • The current loan-to-value (LTV) ratio must be greater than 80%.
  • The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.
Additional information:
  • There is NO maximum loan to value ratio if you currently have a fixed rate mortgage. If you have an adjustable rate mortgage the loan to value ratio cannot be above 105%.
  • They've also tried to streamline the process by using an automated valuation model (AVM), which in many cases will not require you pay for an appraisal.
I am not a lender or mortgage broker and don't intend for this blog post to cover all of the details and requirements but to let you know that there may be some help for you.  Be prepared to spend many hours getting your documentation together for the underwriter's but in our experience it was time well spent.

If you live in the Metro Denver area would like some referrals to mortgage brokers that can help you get started, please feel free to contact me.

1 comment:

  1. Refinancing can certainly be very effective in lowering your monthly mortgage payments, getting a better interest rate or extending your loan term. However, not every refinance makes sense. It is best to run the numbers and find out if the potential savings indicate that refinancing is right for you.

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