Did the big housing meltdown of 2007 cause the value of your home to sink like a rock in a pond? If so, it’s possible that you’re still underwater – or owe more on your home than it’s worth. If you intend to live in your house for the next 10 or 15 years, this may not make much of a difference. However, if you believe you might have to sell within the next two to three years then being underwater would make this very difficult. You might even have to “bring money to the sale,” which is not a good thing.
Have you tried to refinance but were turned down?
Maybe you tried to refinance your home last year but were turned down. This has happened to many homeowners who thought they would be able to do a refi and get some relief from their mortgage payments only to learn that they couldn’t qualify.
Help is available
If you’ve never tried to refinance your mortgage or tried and was turned down, there’s help available in the form of HARP 2.0 or version two of the Home Affordable Refinance Program, which eased the program’s rules. It was extended to December 31, 2013 and removed the cap that had existed on the loan-to-value ratio. It originally had been 125%, which translates into the fact that loans could not be underwater by more than 25%. However, now you could be underwater by 30% or even more and still qualify for a HARP program mortgage.
Many homeowners don’t believe they’re eligible for a HARP refi. However, everyone is whose mortgage is owned or guaranteed by Fannie Mae or Freddie Mac and was made before May 31, 2009 as this video explains.
You may have to be patient
There is now a big boom in HARP refinancing due to today’s low interest rates. As a result, some lenders are facing large backlogs in their application process. This means that if you’re underwater and want to get a HARP 2.0 loan you may have to be patient with your lender.
Contact your current mortgage holder
Most of the big banks such as JP Morgan Chase are focusing on customers whose mortgages they service. However, you’re free to contact any lender that’s participating in HARP though it’s said that you may have a hard time finding one that will take an application from a new lender.
You might have received a letter
Some banks have sent letters to their customers that they had prequalified for HARP 2.0 refinancing. As an example of this, Chase has sent letters to its borrowers offering no closing costs, reduced interest rates and a close within 30 days–assuming these customers could prove they are employed. Plus, HARP borrowers must be current on their monthly mortgage payments though it’s acceptable for them to have had one late payment so long as it occurred at least six months before applying for a HARP loan. If you have private mortgage insurance you will probably be allowed to carry it over to the new refinanced HARP loan. But spoiler alert – if you have a second mortgage you will need to get that lender to agree to the HARP refinancing.
If you weren’t notified
If you haven’t received one of these letters, this doesn’t necessarily mean you don’t qualify for a HARP refi. Your lender may have just not sent letters to its borrowers. You will need to contact the company to see if it is participating in the HARP program. If not, you will need to find another lender that is.
Tips for refinancing
Whether you’re underwater or not, this year would be an excellent time to refinance your mortgage. In fact, this year is the last year we might be able to make this statement. So, if you’ve been just sitting around waiting for the perfect time to refinance and have good credit you should still be able to snag a really good deal and here are tips that could help.
- Stop procrastinating and refinance – get today’s low interest rates while they’re still available.
- If you’re a buyer, get going – with rates as low as they are and home prices rising, this is still a terrific time to buy.
- Be sure to compare FHA versus conventional loans – an FHA (Federal Housing Administration) mortgage might look attractive because you can get one with maybe just 3.5% down. However, your loan will have high FHA fees loaded onto it.. You will need at least 5% down to get a conventional one but if you can handle that, be sure to get quotes on both conventional loans and FHA loans and then compare the two.
- Make sure your credit is superb – credit standards are still high and are not expected to loosen up anytime soon. If you want to do either a refi or get a new mortgage, treat your credit as if it were golden.
- Pay off your mortgage early – if you dream about not having a mortgage one day, this might be a good time to refinance that 30-year mortgage into a 15- or 20-year loan. but don’t make the move unless you’re positive you will be able to afford the somewhat higher payments.
- Even if you’re underwater, don’t take “no” for your answer – as reported above, HARP 2.0 was overhauled so you might now qualify even if you were turned down as recently as three months ago.
