What is a HARP loan?
As a result of the mortgage crisis and financial meltdown in 2007, property values across the country have dropped significantly.
This drop in value has excluded many good paying homeowners from refinancing their mortgage to take advantage of today’s historically low interest rates. In response, the government has come out with the Home Affordable Refinance Program (HARP). This program allows homeowners whose mortgage are owned by Fannie Mae or Freddie Mac (also known as FNMA and FHLMC) to refinance regardless of their home’s value. Nobody actually makes their monthly mortgage payment to Fannie Mae or Freddie Mac, but chances are they own your loan.
To qualify, your loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The HARP program even allows one 30 day late mortgage payment in the past 12 months and multiple late payments as long as it was more than 12 months ago.
Will I need an appraisal with a HARP loan?
To make the HARP program easier for the consumer and lender, appraisal guidelines for this program have changed drastically. Usually a refinance requires a full appraisal of the subject property but since this program is designed to help homeowners that are upside down on their home, the appraisal value is not as much of a concern.
Therefore Fannie Mae and Freddie Mac both have decided to use automated appraisals to establish a value. This saves the consumer an average of $400 and about a week of processing time.
Both Fannie Mae and Freddie Mac have built automated value models (AVM) into their automated underwriting engines. The value assigned to the home after it is run through the automated underwriting engine will be used to determine the loan to value. In some areas (usually more rural) the system will not assign a value. In that instance a standard appraisal inspection would need to be ordered.
Even though the HARP program allows borrowers to refinance regardless of how much value their home has lost, each individual lender gets to choose how they will participate in the HARP program. This is why not all lenders are the same when it comes to HARP loans. Many lenders limit the loan amount to 105% or 125% of the current value of the home. Some lenders do not participate in the program at all.
Why Skyline Home Loans is different?
Our HARP lending guidelines are some of the least restrictive you will find in the industry. On a Fannie Mae owned loan we allow a first mortgage up to 250% of the value of the home.
Example: If your home was valued at $100,000 we would refinance up to $250,000.
On mortgages owned by Freddie Mac we can lend up to 200% of the value. With both of these types of loans it does not matter if you have additional mortgages tied to the property. Those additional loans would just need to subordinate to the new refinance.
A subordination agreement is where the second or third mortgage holder agrees to stay in that position. There is usually a small fee that your second or third mortgage lender will charge to complete the subordination agreement.
Do you pay mortgage insurance with a HARP loan?
Typically Fannie Mae and Freddie Mac loans over 80% of the value of a home require mortgage insurance (MI), but HARP loans are the exception. Loans that currently have MI will keep the MI. The MI from the original loan is simply transferred to the new loan. If you're not currently paying MI on your current loan, you would not be required to get MI on the new HARP loan.
This is a huge benefit saving homeowners $1,000’s over the life of a loan. The most common issue that we run into, is that many homeowners are not aware that their loan has MI. That’s because in the past many lenders were deceptive and did not inform a borrower that the interest rate they were paying actually paid for MI as well. This is called lender paid mortgage insurance or LPMI.
There are actually two types of LPMI, monthly and up-front. Monthly paid LPMI on a HARP loan would have to be converted to a borrower paid policy which would affect the overall monthly payment and savings of a refinance. Up-front LPMI is better for a borrower because that means that the entire MI policy was already paid for when the loan was originated.
This is another area where not all HARP lenders are the same. Many lenders have chosen to work with certain MI companies or they will not refinance someone whose current loan has MI. That’s because there are about a dozen different MI companies, which makes it difficult to develop a consistent relationship.
We don’t take the easy road. We will work with any MI company to help our customers refinance their mortgage. Regardless of the type of mortgage insurance or the company that issued the policy we will work with them to transfer the MI to your new loan.
What if I've been turned down for a Harp loan in the past?
The government’s overall guidelines for the HARP loan have actually changed several times over the past few years; so even if you have been unsuccessful in getting a refinance in the past, now is the best time to see if you can qualify for a HARP refinance.
If you have been turned down by a HARP lender in the past don’t let that stop you from seeing what we can do for you.
We are an experienced HARP lender and can answer all your HARP questions. Spend a few minutes with one of our HARP experts and we can tell you if your loan is owned by FNMA or FHLMC, we can tell you the exact value of your home, we can determine if your current loan has MI, who your MI company is and we can tell you if your loan meets the underwriting guidelines for a HARP loan refinance.
Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our low rate guarantee!
Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Skyline Home Loans. Please consult with a licensed loan officer for expert advice regarding financing or refinancing a home.