President Obama’s refinance program HARP 2.0 (Home Affordable Refinance Program) has been a great success so far for many underwater homeowners! This program is helping upside down homeowners refinance at today’s record low rates. There are 4 main requirements that homeowners need to meet in order to qualify for this refinance program, so here is what you need to know to qualify for this program.
What is HARP?
The Obama administration initially rolled out HARP 1.0 in 2009 to refinance borrowers whose loans were backed by Fannie Mae and Freddie Mac and who were current on their payments. The idea was simple: If you were making your payments on time but didn’t have enough equity to refinance, you would be able to lower your rate without having to pay down your mortgage balance or take out mortgage insurance.
Initially, the program was limited to borrowers who owed between 80% and 105% the value of their homes. In mid 2009, the program was opened to borrowers who owed up to 125% the value of their homes. But either bad appraisals killed too many deals, or most lenders did not participate in the program to 125%, so overall the program was not a success. But HARP 2.0 has removed the loan to value requirement for homeowners, so now it does not matter how upside a homeowner is.
How to Qualify for HARP 2.0
There are 4 main requirements that need to be met to qualify for this program. If you can answer “YES” to the following 4 questions, then you should meet the requirements to qualify for this program.
1. Does Fannie Mae or Freddie Mac own your mortgage?
Most homeowners don’t know if Fannie Mae or Freddie Mac owns their mortgage. To verify if Fannie or Freddie owns your mortgage, we just run your property address through their “Loan Look Up” tool. Feel free to send me a quick email with your address and I can check for you.
2. Have you paid your mortgage on time in the past 6 months?
This new refinance program requires that you have not been late on your mortgage in the past 6 months, and only allows one mortgage late in the past 12 months. *This means you were NOT more than 30 days delinquent on a monthly payment.
3. Is your current mortgage balance less than your allowable county limit ($546k in San Diego)?
For example in San Diego, the county loan limit for jumbos is $546k, so if you owe less than this you can qualify for this program. Check HERE for your county loan limit.
4. Did your current mortgage close before June 1st 2009?
In order to qualify for this new program, your last refinance had to be prior to June 1st 2009, or if you purchased before that date, you have never refinanced after June 1st 2009.
Frequently Asked Questions about HARP 2.0
Here are the most frequently asked questions, along with answers, that people ask in regards to how to qualify for HARP 2.0.
1. What if I owe $400k, but my property value is $300K?
That’s ok, this program allows homeowners to be upside down, we have seen cases where homeowners were at 200% loan to value!
2. Do I need to do an appraisal even if I am upside down?
In some cases yes, but not everyone has to do an appraisal. Here is how you find out if an appraisal is needed. *We run your loan application through Fannie Mae’s automated underwriting engine, the automated underwriting decision will tell us right away if an appraisal is needed or if you got an appraisal waiver.
3. Can I refinance a 2nd home or an Investment Property?
Yes, even if you own a 2nd home or an investment property and these properties are upside down too, you will also be allowed to refinance these loans under this new program!
4. What if I owe more than $417K?
That’s ok, you can refinance up to your maximum Conventional jumbo county loan limit, for example this is $546k in San Diego.
5. What if I have a 2nd Mortgage?
That’s ok too, the 4 banks (Wells, B of A, Citi & Chase) who own most of the 2nd mortgages in the US are actively participating in this program, and are currently allowing 2nds to be subordinated. So you will still be eligible to refinance your first mortgage even if you have a current 2nd mortgage that is over the value of your home.
6. What if my new loan is over 80% of the value of my home, will the lender require mortgage insurance?
No, there will be NO mortgage insurance required on the new loan. *Your new loan will NOT require mortgage insurance “MI”, as long as your current loan also does NOT have mortgage insurance.
7. What if I currently have mortgage insurance
If you have mortgage insurance on your current loan, the mortgage insurance will automatically be transferred to the new loan. Banks and most mortgage insurance companies are transferring over the mortgage insurance “MI” in most cases.
8. What are the credit score requirements?
Most lenders only require a 620 score to qualify for this new refinance program, this will ensure that borrowers with lower credit scores will now get the opportunity to refinance at today’s low rates.
9. What if Fannie or Freddie don’t own my loan—can I refinance through this program?
Unfortunately No. That’s a major limitation, of course, because “jumbo” mortgages aren’t held by Fannie and Freddie, and many of the most underwater subprime mortgages are in privately held mortgage securities that weren’t issued by Fannie and Freddie.
10. Do I need to provide 2 years of tax returns to qualify?
No, overall there is minimal documentation needed to qualify for this program! In fact the majority of lenders only require a recent pay stub and a recent W2 instead of full tax returns!
11. Do I need a lot of reserves to qualify?
No, most lenders do NOT require reserves on owner occupied properties, but reserves are required for 2nd homes and investment properties.
HARP 2.0 will help many more people refinance
This HARP 2.0 program is not perfect by any means, and it does not help everyone. But the Federal Housing Finance Agency is estimating that over 1 million homeowners will be able to refinance through HARP 2.0.
For example, as you can see below, refinancing since 2010 has been extremely muted in CA and especially amongst borrowers with credit scores lower than 680, compare this to borrowers with scores even over 720. So this program is especially going to help those homeowners with lower credit scores refinance into a better interest rate.
Overall I think this program is one of the better plans initiated by this administration so far to aid the housing market, as it is allowing many homeowners to drop their interest rate from over 6% down to rates in the high 3’s low 4% range, and save on average over $200 a month.
If you have any questions in regards to this program please feel free to email me or contact me directly at 858-200-9602, or if you know someone who could benefit from this program, please feel free to forward this information to them.