Lowering your interest rate is not the only way to save money by refinancing through HARP. The program also offers other built-in benefits that can save you money when you take out the new loan:
Ignore a new notice
With traditional refinancing, homeowners have to pay hundreds of dollars for reassessment. However, some HARP mortgage lenders allow homeowners to bypass the appraisal process and use an automated home value system. Your lender will be able to tell you more in due course.
Go from adjustable rates to fixed rates
If you currently have an adjustable-rate mortgage (ARM), you can use HARP to get a fixed-rate mortgage. Because an ARM payment can quickly become too expensive for homeowners, switching to a lower and more consistent payment via HARP can reduce the overall amount of your mortgage.
Who is eligible for HARP?
Ratings for HARP refinancing can vary widely depending on the mortgage provider. However, federal approval guidelines are fairly straightforward:
You are up to date with your mortgage: there have been no 30 days late payment in the last six months and no more than once in the last 12 months
Your residence is your main residence, a secondary unit of 1 or investment property of 1 to 4 units
- Your loan belongs to Freddie Mac or Fannie Mae
- Your loan was purchased on or before May 21, 2009.
- Your current loan value to a ratio (LTV) must be greater than 80%
Fortunately, HARP does not set an upper limit for the LTV relationship. As long as you meet the criteria listed above, you can use the program regardless of the amount you owe at home. Freddie Mac and Fannie Mae both need HARP loans to provide at least one of these benefits: A more stable mortgage (for example, moving away from a variable rate mortgage)
- Lower interest rates
- Short term loan
- Reduced monthly principal and interest payments
If you know the philosophy of Dave Ramsey, you know that simply reducing your monthly payment is not reason enough to refinance. But HARP offers many benefits that go beyond reducing your monthly bill and helping owners of underwater homes get back to the top.
How to start the HARP process
If you think you can benefit from HARP, you need to take a few steps to prepare. First, contact a trusted lender who has the knowledge and experience to guide you through this process. They will work with you to determine if your loan belongs to Freddie Mac or Fannie Mae and to make sure that you are old enough to qualify for HARP. Remember that only loans taken out before May 21, 2009, are eligible. Once you have your lender in refinancing, you will be asked for two types of documents: your mortgage statements and income verification. In most cases, you only need to provide proof of payment or income tax documents (such as your W2) to confirm your income. And if you are currently paying for Private Mortgage Insurance (PMI), your new HARP-based mortgage must have the same insurance, which can mean fewer savings in the refinancing process.
But now that you know the benefits that HARP can bring to your monthly budget, you can finally take back control of your mortgage. Don’t waste too much time!