How can it be that you can make all your payments on your home loan and still be falling behind? If the value of your home decreased when the housing bubble burst, you may owe more on your house than it’s actually worth. This is called having an “underwater mortgage,” but if you’ve ever had an underwater mortgage, you know that it can feel like you’re the one who’s drowning.
Refinancing a home in this situation can be extremely difficult because it is a high-risk loan for a lender. That’s where HARP comes in. If you’re in this position, a HARP loan may be the key to refinancing your house and getting your feet back on stable ground.
What is HARP 2.0?
HARP stands for Home Affordable Refinance Program. It’s a program created by the federal government in March 2009 to help homeowners refinance if they are underwater or near underwater on their mortgages. In March 2012, HARP was updated with new guidelines and became HARP 2.0. By refinancing through the HARP program, you can take advantage of rates that are at record lows, but you have to meet specific guidelines to qualify.
What are the guidelines for refinancing under HARP 2.0?
To refinance under Fannie Mae’s version of the program, which is known as “Du Refi Plus,” you must meet the following guidelines:
- Your current loan that you want to refinance must have been guaranteed by Fannie Mae before June 1, 2009
- If you have a second mortgage on your property, it must be re-subordinated. In other words, the second mortgage holder must agree that you will still pay your second mortgage off after your refinanced mortgage.
- You must have made all payments on time in the last 6 months. In the last 12 months, you are only allowed to have one payment made 30 days late.
- The loan-to-value ratio (how much you borrowed compared to how much your property is worth) must be greater than 80%.
What can I do with a HARP 2.0 refinancing loan?
- You can refinance a primary, second home, or investment property.
- You can drop a co-borrower if you’ve made the last 12 payments on your own.
- You can add a co-borrower if you (the original borrower) remain on the loan.
- You can often get a Property Inspection Waiver (PIW), which means you don’t have to get a new appraisal on your property before you can refinance.
- One thing you CAN’T do is combine (or roll) two mortgage into one.