Your guide to understanding HARP loans!
If you're considering refinancing your mortgage, you might have come across the term HARP loans. HARP stands for Home Affordable Refinance Program, and it's a government program designed to help homeowners who are underwater on their mortgages or have little equity to refinance their loans. Here, we'll explain what HARP loans are, how they work, and whether you might be eligible for one.
What Are HARP Loans?
HARP loans are a type of refinance loan that is backed by the federal government and is available to homeowners who are current on their mortgage payments but have not been able to refinance due to a decline in their property values or lack of equity in their homes.
The program was established in 2009, in the wake of the housing crisis, to help homeowners who were struggling to make their mortgage payments and facing the possibility of foreclosure.
How Do HARP Loans Work?
HARP loans work by allowing homeowners who have little or no equity in their homes to refinance into a more affordable mortgage. The program is designed to help homeowners who have been unable to refinance their mortgages due to the decline in property values during the housing crisis.
Under HARP, homeowners who meet the eligibility requirements can refinance their mortgages to a lower interest rate or a more stable mortgage product, such as a fixed-rate mortgage, which can help them save money on their monthly mortgage payments.
Who Is Eligible for a HARP Loan?
To be eligible for a HARP loan, you must meet the following requirements:
- Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac
- Your mortgage must have been originated on or before May 31, 2009
- You must be current on your mortgage payments and have a good payment history for the past 12 months
- The amount you owe on your first mortgage must be more than 80% of the current value of your home
- You must not have been previously refinanced under HARP (unless it was a Fannie Mae loan that was refinanced under HARP from March-May 2009)
- You must have the ability to make the new mortgage payments
If you meet these eligibility requirements, you may be able to refinance your mortgage under HARP. However, it's important to note that not all lenders participate in the HARP program, so you should check with your lender to see if they offer HARP refinancing.
What Are the Benefits of a HARP Loan?
There are several benefits of a HARP loan, including:
- Lower interest rates: HARP loans offer lower interest rates than traditional refinance loans, which can help homeowners save money on their monthly mortgage payments.
- No appraisal required: Unlike traditional refinance loans, HARP loans do not require an appraisal, which can save homeowners time and money.
- No out-of-pocket costs: HARP loans do not require any out-of-pocket costs, such as application fees or closing costs, which can make them a more affordable option for homeowners who are struggling to make ends meet.
- No credit score requirements: HARP loans do not have any specific credit score requirements, which means that homeowners with less-than-perfect credit may still be eligible for a HARP loan.
- More stable mortgage payments: HARP loans offer more stable mortgage payments by allowing homeowners to refinance into a fixed-rate mortgage, which can help them avoid the risk of rising interest rates.
What Are the Drawbacks of a HARP Loan?
While there are many benefits to a HARP loan, there are also some drawbacks that homeowners should be aware of, including:
- Limited eligibility: HARP loans are only available to homeowners who meet the eligibility requirements, which means that not all homeowners will qualify for a HARP loan.
- Limited term options: HARP loans offer limited term options, which may not be suitable for homeowners who need or want longer-term loans.
- Longer payout period: HARP loans may extend the payout period of a mortgage, which could mean homeowners end up paying more in interest over the life of the loan.
Overall, if you're a homeowner who is struggling to make your mortgage payments or have little equity in your home, a HARP loan may be a good option for you. Be sure to check with your lender to see if you're eligible and to find out more about the benefits and drawbacks of a HARP loan.