If you don't have enough equity in your home to qualify for standard mortgage refinancing you may benefit from certain federally backed programs. Using the government's Home Affordable Refinance Program, for example, you could refinance your present mortgage and secure a lower interest rate. Under HARP, mortgage lenders are allowed to refinance the mortgages of eligible owners who have little to no equity in their homes. Eligible homeowners refinancing through HARP sometimes reduce their monthly mortgage payments by $100 or more, in fact.
HARP Refinancing Guidelines
Traditional mortgage refinancing typically requires 20 percent home equity before a refinance can be approved. Under HARP, however, homeowners can owe as much as 125 percent of the value of their homes on their mortgages and still qualify for refinancing. A homeowner with a residence valued at $200,000, for instance, could qualify for HARP refinancing even if she owed as much as $250,000 on her mortgage loan. In many cases, appraisals to determine home values for HARP refinancing purposes are also waived.
Participating HARP Lenders
Many conventional and federally backed mortgages aren't actually owned by the lenders receiving homeowners' payments. Rather, most mortgage companies service mortgages on behalf of those loans' owner-investors. Only mortgages owned or guaranteed by mortgage investors Fannie Mae or Freddie Mac are eligible for refinancing through HARP. Mortgages eligible for HARP refinancing can also be refinanced through any participating lender, too. HARP refinancing and closing costs may also be included in the refinance and credit scores aren't usually considered.
Determining HARP Eligibility
The MakingHomeAffordable.gov website provides a webpage where homeowners can determine whether their mortgages are owned by Fannie Mae or Freddie Mac. Once in the "Loans Lookup" page of MakingHomeAffordable.gov hold your cursor over the "Programs" tab at the page's top and click on the "Lower Your Rate" link. Homeowners must enter their street address, city, state and zip code to determine if their mortgages are HARP-eligible. Eligible homeowners must be current on their mortgages to qualify for HARP refinancing.
Non-HARP Mortgage Refinancing
Traditional mortgage refinancing guidelines vary from lender to lender. Non-HARP-eligible homeowners should consider shopping around for other lenders willing to consider more traditional refinancing programs. In some cases, non-HARP mortgage refinancing may be approved by one lender while a different lender will disapprove the same refinancing application. And though it's relatively rare, some lenders also make exceptions to the 20 percent home equity rule that's standard in traditional mortgage refinancing.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.