What is a HARP Refinance Loan?
The Home Affordable Refinance Program (HARP) is a federal program that can help you refinance your home with the goal of making your mortgage more stable and affordable.
How The HARP Loan Program Started
When the U.S. housing bubble burst in 2006, numerous homeowners experienced a decline in the value of their homes due to home prices decreasing nationwide. Many home values dropped or almost dropped below outstanding mortgage balances — creating widespread negative equity. Many homeowners were unable to refinance their mortgages because their loan-to-value ratios were drastically higher than 80% — the percentage typically required to refinance without paying private mortgage insurance (PMI). So, if a homeowner wanted to refinance, but wasn’t already paying PMI, the added cost would negate the benefit of refinancing. Overall, this led to many underwater homes and homeowners being unable to refinance their mortgages. In 2009, the U.S. government launched the HARP program with the Federal Housing Finance Agency.
What Are The Benefits Of a HARP Loan?
HARP can help you refinance your mortgage if you’ve had difficulty obtaining traditional refinancing due to a lack of home equity or a decline in your home’s value. It can also help if your home is underwater, meaning you owe more on your home than it’s currently worth. Overall, a HARP refinance loan may help you:
- Reduce your monthly payment.
- Change your interest-only, adjustable rate, or balloon/reset mortgage into a more stable fixed rate mortgage.
- Change the term of your mortgage.
- Obtain a new mortgage that doesn’t require PMI, even if your loan-to-value (LTV) is greater than 80%.
- Refinance a primary residence, secondary home or investment property.
- Waive the required home appraisal under certain circumstances.
What Do You Need To Qualify For HARP?
To be eligible for the HARP program, you must meet all of the following criteria:
- Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- Your mortgage must have been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.
- Your mortgage cannot have been previously refinanced under HARP unless it’s a Fannie Mae loan that was refinanced under HARP from March to May 2009.
- Your current LTV ratio must be greater than 80%.
- You must be current on your mortgage at the time of refinancing. You must have no 30-day late payments in the past 6 months and no more than one late payment in the last 12 months.
- Your home must be a 1- to 4-unit primary residence, a 1-unit second home, or a 1- to 4-unit investment property.