Last Updated on Dec 18, 2019 by James W

For many, the Home Affordable Refinance Program is an excellent opportunity to refinance an existing loan into one that is more affordable or a better fit. This particular federal government program offers an opportunity to refinance for individuals who have a home with little to no available equity. It is not available to all property owners. Various eligibility requirements exist. However, for those who do qualify, it can be an excellent way to refinance a home loan.

How Does the Program Work?

The Home Affordable Refinance Program, also called HARP, allows a homeowner to refinance their home even if they do not have a lot of equity in it. The program was created under the Federal Housing Finance Agency to help those who are current on their home loan to get better terms. More specifically, the program’s goal was to help individuals who need to refinance but cannot do so because their property’s value has fallen over time, to qualify for a loan.

What Is Equity?

A key component of this opportunity centers around equity. In a traditional refinance, a borrower is able to obtain a new loan to replace their existing loan as long as they have some equity built up in it. Equity is an unmortgaged value in the home. For example, if a homeowner purchased a home 10 years ago for $300,000, he or she may have made enough payments so that they now owe $230,000 on the home. The home may be worth $300,000, but in this case, they have $70,000 worth of equity. Tapping into this value for debt consolidation, home improvements, or other needs is an option.

However, many people saw their home’s value fall over the last decades, making it impossible for them to refinance. In the above example, they may have a home purchased for $300,000 and owe $230,000 on it, but their home may now only be worth $240,000. This provides only $10,000 worth of equity. And, it makes it very hard for the homeowner to refinance into a new loan.

Why Refinance?

With the Home Affordable Program, a homeowner can request a new loan from a lender. Refinancing allows the owner to tap into the equity, but it can also provide other benefits. This includes allowing the property owners to secure a lower interest rate, improve their monthly payment, or even reduce how much time it takes to repay the loan. These are all cost-savings opportunities.

How to Qualify for the Program

For those who would like to consider their options through the Home Affordable program, the process starts with eligibility. There are very specific eligibility requirements for property owners taking advantage of this program. They include the following:

Current Mortgage

Unlike other programs to help homeowners who are struggling with making payments, the HARP mortgage refinance focuses on helping those who are current on their mortgage loan. Individuals must be up to date on all payments. They cannot have been late more than 30 days in the last six months. And, they can only have one instance of being 30 or more days late in the previous year, as reported by their mortgage lender. Individuals who are late on their payments may not qualify for this loan or other types of refinancing opportunities.

Home Type

The HARP mortgage refinance opportunity is diverse. It can help most types of homeowners to refinance. This includes those who are living in the home as their primary residence. It also includes one-unit second homes owned by an individual. It can also be used on homes with one to four units that are investment properties. Earlier versions of the program did not allow for all of these options. Today’s version does.

Home Loans Ownership

It is also important for individuals to verify the ownership of the mortgage. The Home Affordable Refinance plan is available for loans owned by Freddie Mac or Fannie Mae. These are two of the largest home loan buying organizations in the United States. They are government-backed programs. However, many borrowers do not know their loan is owned by these organizations. A lender can help to verify this information.

Timing of the Loan

Another key eligibility requirement is that the loan must have been originated (closed on by the lender at the time of securing it) by May 31, 2009. No loans originated after this will qualify for the program.

For individuals considering their options in the Home Affordable Refinance Plan, it is important to work with a qualified lender. The lender must be approved by Freddie Mac or Fannie Mae to qualify. Property owners do not have to use their existing lender for the refinance. And, most property owners should consider comparing lenders carefully to determine eligibility and qualification for the refinance program.

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