The Home Affordable Refinance Program (HARP) is a federal home loan program that was designed to help homeowners refinance their mortgages. With HARP loans, borrowers can take advantage of current low rates, even if they have little equity built up in the home or are having trouble making payments. This loan option is often known as the "Obama Mortgage," since it was created by the Obama Administration.
If you are up to date on your mortgage payments, yet you cannot get traditional refinancing because the value of your home has dropped, you may be eligible for the HARP program. Many times, the only way homeowners can refinance on a home that has dropped in value is through HARP.
If the following is true, you can be eligible to receive financing under the Home Affordable Refinancing Program:
As with essentially all other mortgage loan products, the money a homeowner may borrow compared to the value of the property determines the interest rate of the refinance. The borrower’s credit will also be a deciding factor.
It is possible to roll the closing costs into the new loan, but there are limitations. Fannie Mae puts a cap at 4% of the current loan amount. Freddie Mac allows up to 5% of the total amount or $5,000, whichever one comes first. Any amount that exceeds these limits must be covered by the borrower in cash.
It isn’t necessary to obtain a HARP refinance with the same lender who gave you the original loan. While your mortgage servicer may participate in HARP, not all lenders do. The cost of the Home Affordable Refinance Program will differ by lender. It’s important to compare rates and fees to ensure that you get the best terms on your refinance.
The HARP program is set to run until December 31, 2014, yet Congress is considering putting out a HARP 3.0, which will be a third version of the HARP program. HARP 3.0 is said to offer increased opportunities for eligibility and to be extended to mortgages that are not backed by Freddie Mac or Fannie May. The new HARP program will also feature looser qualification guidelines, and those who have used a HARP refinance to get a new one.