A Complete Guide to the Home Affordable Refinance Program (HARP)

Have you heard of a mortgage type called HARP? Since you are searching for a home right now, you probably know this abbreviated term stands for Home Affordable Refinance Program. The HARP mortgage loan was a flexible type of home loan a homeowner could avail if they went underwater or near underwater in their loan. With a HARP, they could refinance their mortgage to avoid becoming a defaulter, especially if they struggled with the monthly payments.

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The Federal Housing Finance Agency (FHFA) created HARP in 2009. It was made available to homeowners with mortgages owned or guaranteed by Fannie Mae or Freddie Mac. The program did not have a minimum credit score or a maximum loan-to-value ratio requirement. As a result, HARP made it easier for homeowners who were underwater on their mortgages to refinance to better terms, even if they had a high LTV ratio or poor credit.

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Unfortunately, the Home Affordable Refinance Program expired on December 31st, 2018.

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What is the Alternative?

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You must not fret, though. The Home Affordable Refinance Program might have ended in 2018, but HARP 2.0 is here now! Unlike the previous version, this one does not have an LTV ceiling for individuals with fixed-rate mortgages. Under the second version of the HARP mortgage loan, it is possible for people to qualify for a refinance loan with an LTV ratio above 125%. Just remember that if you have an adjustable-rate mortgage (ARM), you will not be eligible for the program, especially if your LTV ratio exceeds 105%.

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More About HARP 2.0

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HARP 2.0 streamlines the process of property refinancing by allowing borrowers to replace their existing mortgage loans without getting an appraisal or going through an underwriting process. Additionally, it is adjusted or waived off from homeowners against a small sum of money as a fee. This is applicable only to people who wish to reduce their loan terms. To be precise, it reduces risk-based fees, known as loan level price adjustments, to 0% when loan terms lasted for less than 21 years and to 0.75% when loan terms lasted for at least 21 years.

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This new version of HARP also reduced the number of documents needed to verify whether applicants met the program’s income requirements. A borrower can qualify as long as they have enough savings to pay their mortgage for at least a year.

 

With HARP 2.0, homeowners no longer have to work with the original lenders. They may qualify for a refinance even if they have lender-paid mortgage insurance. If you have private mortgage insurance (PMI), you can avoid paying for additional insurance coverage.

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Conclusion

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Just because the HARP mortgage loan is no longer available does not mean you have few options. There are several other government-backed programs that can help homeowners refinance their mortgages, such as the Federal Housing Administration’s (FHA) streamline refinance program and the Veterans Affairs Interest Rate Reduction Refinance Loan (VA IRRRL) program. There are several standard refinance programs, too. You should explore all options before choosing one.