Top 3 Reasons for HARP Refinance pros and cons
If you`re one of the millions of homeowners still making monthly mortgage payments, you`ve probably heard about the Home Affordable Refinance Program, also known as HARP. HARP is a government program that was especially created for homeowners who, for various reasons, might not otherwise qualify for mortgage refinancing from banks and other traditional mortgage lenders.
The HARP programs works for some homeowners and may not work for some others. The success of this programs has been based on individual cases and cannot be generalized. Depends on the loan and the situation.
Because of the recession, it is estimated that millions of homeowners owe more money on their mortgage payments than their homes are actually worth. In 2009, HARP was specifically created to help homeowners refinance mortgages on homes that were suddenly devalued because of the current crisis in the housing market.
The biggest benefit of the program is that under HARP, the value of your home is not a factor in your refinancing qualification. This is good news for the millions of homeowners who would otherwise be restricted from refinancing because of newly devalued properties. Additionally, those who are paying on a second mortgage can also easily qualify for refinancing under the HARP program.
To qualify for HARP refinance, you do have to meet certain eligibility requirements:
All of your mortgage payments must be current and up to date and you cannot have made any late payments within the six months prior to applying for your HARP loan. In addition, you cannot have made more than one late mortgage payment during the 12 months prior to your application.
Your existing mortgage agreement must have been sold to Freddie Mac or Fannie Mae prior to June 1, 2009. If you`re not sure if your mortgage is owned by Fannie Mae or Freddie Mac, you can find out by talking to your mortgage lender. You can also find the information online by visiting www.FreddieMac.com or www.FannieMae.com.
If your home has devalued considerably since your purchase, you may qualify for HARP refinancing. HARP has benefited hundreds of thousands of homeowners across the country. However, it works more effectively for some than for others. Here are some pros and cons you should consider before signing up for HARP refinance:
Under the HARP program, the appraisal value of your home will be calculated by an automated system through Fannie Mae or Freddie Mac; you won`t have to worry about appraisal costs or on-site appraisers visiting your home.
If your credit score is good, you can get excellent terms. These include a zero cost refinance at the lowest current interest rates available, regardless of how much your home may have revalued. You won`t be charged closing costs or other service fees that you would typically have to pay under a traditional mortgage refinance program.
Having a HARP refinance will not adversely affect your credit. A HARP refinance agreement is treated the same as any other type of mortgage refinance; you won`t be penalized for qualifying and making lower payments under your HARP agreement.
If your loan has mortgage insurance, you may be required to refinance with your current mortgage lender, whether you want to or not. You`ll be restricted from mortgage shopping for the best terms and this may be a problem if you want to change lenders.
If you`ve had any credit problems or if your credit cards are maxed out, you may not get the terms you want. For example, if you have a mortgage financed at 100 percent of the home`s current value and you want to refinance at 125 percent under a HARP agreement, your lender may not agree to the new terms, particularly if you have high balances on your cards or existing loans.
Whether you`re considering to refinance here, or other sources to research your options, it`s important to completely understand the benefits. After you`ve done your homework, you may find that a HARP agreement may substantially lower your monthly payments and save you thousands of dollars in interest fees.