The Home Affordable Refinance Program (HARP) is a federal program designed to help homeowners refinance to take advantage of low rates, even if they are currently underwater on their mortgage or have very little equity.
Because the HARP program was created by the Obama Administration, this loan option is often called an "Obama Mortgage" or the "Obama refinance program."
If you are not behind on your mortgage payments, but cannot get refinancing through traditional means because your home value has dropped, you may be eligible for the HARP program. If your home has lost value, the HARP program may be the only way you can refinance.
Am I Eligible for HARP?
You may be eligible to refinance under the HARP program if the following is true:
- Your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.
- Your note date (the day your mortgage closed) is May 31, 2009, or earlier.
- You are current on your mortgage with no late payments made 30+ days past due in the last six months and no more than one late payment in the last 12 months.
- You have not used a HARP refinance on the home before.
Advantages of HARP Refinance
- Homeowners with a first and second mortgage can qualify.
- There is no maximum loan-to-value (LTV) ratio for HARP.
- Homeowners underwater on their mortgage are encouraged to use a HARP refinance.
- No mortgage insurance is required under HARP unless your existing loan has private mortgage insurance, in which case it will remain the same.
Borrowers with large mortgages in the 6-8% range will benefit the most from a HARP refinance than a homeowner with a smaller mortgage.
HARP Closing Costs
As with virtually all other mortgage products, the money a homeowner may borrow compared to the value of the property affects the cost and interest rate of the refinance. The borrower's credit score also plays a role.
It is possible to put closing costs into the new loan, although there are limitations. Fannie Mae caps' closing costs at 4% of the existing loan balance, while Freddie Mac allows up to 5% or $5,000; whichever is less. Any amount over these limits must be paid by the borrower in cash.
Applying for a HARP Refinance
It is not necessary to complete a HARP refinance with the same lender who originated your original loan. While your mortgage servicer may participate in HARP, not all do. The cost of a HARP refinance will also vary by lender, so it is important to compare rates and costs, to ensure the best refinance terms.
When Will the HARP Program End?
The HARP program is set to end on December 31, 2015; although Congress is debating HARP 3.0, a third version of the popular program. HARP 3.0 will expand eligibility to mortgages not backed by Freddie Mac or Fannie Mae, allow homeowners who have already had a HARP refinance to get a new one, and loosen credit, employment, and income verification guidelines.