Federal Mortgage Home Refinance Program
Government Loan Refinancing to Make Home Payments Affordable
Homeowners that want to take advantage of lower interest rates may be eligible for the Home Affordable Refinance Program or HARP. This federal mortgage assistance program is part of the Obama Administrations Making Home Affordable Refinance Program. HARP is applicable for responsible homeowners that are not behind on their mortgage payment obligations.
Government Refinance - Making Home Affordable Program
The Making Home Affordable Program has two main components. The first component is the Home Affordable Modification Program (HAMP). For qualifying homeowners, HAMP provides government assistance for a loan modification. To qualify, the homeowner must be able to document a financial hardship. Another qualifier is the monthly mortgage payments (including property tax and insurance) must be able to be reduced to a total of 31% of the homeowner’s gross income.
For the mortgage holder who’s not in dire financial straits, but can’t take advantage of lower interest rates due to negative home equity, there’s the Home Affordable Refinance Program or HARP. The government-refinancing program uses current mortgage rates and the rates are fixed over a 30-year period. HARP is especially beneficial for homeowner’s that are facing variable adjusted interest rate.
HARP Mortgage Refinancing Qualifications
- The current mortgage loan must be owned or guaranteed by Freddie Mac or Fannie May
- The amount still outstanding on the first mortgage cannot be more than 125% of the current market value.
- The current mortgage payments must be current and no late payments over 30 days in the last 12 months.
- The homeowner(s) must be able to make the refinanced payments, Income to debt ratio.
- The new mortgage needs to improve the stability of the loan
- The homeowner(s) must be the current owner of one-to-four unit home
If there is a second mortgage on the home, the additional mortgage cannot be combined with the first mortgage. The 125% of value to equity rule still applies, but only to the first mortgage. The second mortgage will not disqualify the homeowner. As an example, let’s use the following scenario:
- Owed on the first mortgage - $300,000
- Current home value $360,000
- Owed on second mortgage $50,000
Since the current market value is 120% of the amount owed on the first mortgage (less than 125%), the homeowner may still qualify for HARP. The second mortgage will not be included in the refinance and will remain as it was before the refinance.
Applying for Home Affordable Refinance Program
The first thing is to find out if Fannie May or Freddie Mac owns the current mortgage. If they do not, there’s no need to go any further. If the homeowner meets all the other qualifications, then the current mortgage provider should be contacted to apply for the program. The current mortgage provider may ask for certain financial documents that must be provided like income taxes, pay stubs, other mortgages, credit card statements and other debt related documents.
The biggest benefit of HARP is for the property holder that can’t refinance due to owing more on the mortgage loan than the home is worth. Another big benefit is for the homeowner that may face increasing payments due to an adjustable mortgage rate. HARP will bring stability with a fixed rate over the life of the loan. The Home Affordable Refinance Program is due to expire June 10th 2010.
Source:
makinghomesaffordable.gov
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