Turned away by traditional refinance lenders? Here's how federal lending programs can help.
The Federal Housing Finance Agency created the Home Affordable Refinance Program, or聽, in 2009 to give refinance options to homeowners whose mortgage balances are higher than their property values and who are often turned away by traditional lenders. So far, HARP聽has helped more than 3.4 million homeowners refinance their loans.
HARP expires Sept. 30, 2017, but two refinance options will fill the void:
- 罢丑别听.
- 罢丑别听.
Both refinance options have the same requirements and are meant for borrowers with high loan-to-value ratios.
As of October 2016, more than聽251,000 mortgages were eligible for a HARP loan. However, fewer than 139,000 would actually benefit from one,聽according to the Urban Institute鈥檚 Housing Finance Policy Center, because the closing costs to refinance those mortgages would outweigh any long-term savings.
Here鈥檚 a closer look at these two programs:
Why you should consider the new refinance options
Like HARP, the new refinance options can reduce the term or interest rate on your existing loan, as well as lower your overall monthly principal or interest payments. That frees up space in your monthly budget to聽meet other financial obligations.
鈥淧roviding a sustainable refinance opportunity for high LTV borrowers who have demonstrated responsibility by remaining current on their mortgage makes financial sense both for borrowers and for [Fannie Mae and Freddie Mac],鈥� said FHFA Director Melvin L. Watt in a release. 鈥淭his new offering will give borrowers the opportunity to refinance when rates are low, making their mortgages more affordable and thus reducing credit risk exposure for Fannie Mae and Freddie Mac.鈥�
Refinance program eligibility
If you already have a HARP loan, you won鈥檛 be able to聽聽through these programs, because聽you鈥檝e already received federal mortgage relief. To be eligible, you must also:
- Have made 12 consecutive monthly mortgage payments on the loan since it became part of Fannie Mae鈥檚 or Freddie Mac鈥檚 portfolio.
- Not have made a聽late payment within the past six months.
- Not have missed more than one payment within the previous 12 months.
- Have a verifiable source of income.
- Receive at least one of the following benefits from the refinance: a reduction in your monthly principal and interest payment; a lower interest rate; a shorter amortization term; or a more stable loan product (switching from an adjustable-rate mortgage to a fixed loan, for example).
Advantages of applying
These new loans have several advantages over a traditional refinance. They don鈥檛:
- Require a minimum credit score.
- Mandate a maximum debt-to-income or loan-to-value ratio limit.
- Usually require an聽appraisal.
- Limit the number of times聽you can refinance with these programs.
- Set a聽loan origination cutoff requirement. HARP, by contrast, is applicable to聽loans originated on or before May 31, 2009.
They also have a streamlined application and documentation process.
How to get help
If you want to refinance but traditional lenders have turned you away, ask聽Fannie Mae or Freddie Mac if you qualify once the new programs go live in October. And contact your current lender as soon as possible to explore relief options.
Deborah Kearns is a staff writer at NerdWallet, a personal finance website. Email:聽dkearns@nerdwallet.com. Twitter:聽.
This story originally appeared on .听
