HARP Refinance Loan: A Guide for Homeowners

The Home Affordable Refinance Program helps homeowners with little to no equity refinance when other lenders won't allow it. HARP is a temporary government initiative that permanently replaces a bad mortgage. Not to be confused with the government's mortgage modification program, HARP allows you to pay and close out your old mortgage in favor of a new loan with more affordable terms. HARP is scheduled to end on Dec. 31, 2016.

HARP Has Flexible Guidelines

It's virtually impossible to get a traditional refinance when you lack sufficient equity. Homeowners who are underwater, owing more on their mortgage than their home is worth, can qualify for a refinance through HARP despite having no equity. Traditional refinances require you to have a minimum of 5 percent to 20 percent equity, and the Federal Housing Administration requires at least 3.5 percent equity. But if you owe 100 percent or more of your home's value, you can refinance through HARP. It doesn't impose a loan-to-value limit if you refinance into a fixed-rate loan, and allows up to 105 percent LTV if you refinance into an adjustable-rate mortgage.

Warning

Individuals lenders that participate in HARP can impose more stringent qualifying guidelines, known as overlays. For example, a HARP lender may limit the LTV to 105 percent, even if you choose to refinance to a fixed-rate mortgage. Shop HARP lenders to determine their specific overlays.

Basic Eligibility Criteria

Your current loan must be a conventional mortgage owned or backed by Fannie Mae or Freddie Mac. The loan must be older than May 31, 2009 and cannot have been previously refinanced through HARP, unless the refinance took place from March to May of 2009. Your loan must be current, with no 30-day late payments in the past 6 months and no more than one late payment in the past 12 months. Your primary residence, a second home or 1- to 4-unit investment property may qualify.

Application and Approval Process

Ask your current lender or loan servicing company if it participates in HARP. You can also search Fannie Mae and Freddie Mac databases for HARP lenders. HARP requires an application and loan approval process similar to that of a traditional home purchase or refinance. However, you may not need an appraisal for HARP. Applying for HARP is free. Making Home Affordable, the federal program that oversees HARP, warns against using service providers that charge for the application or counseling. The Department of Housing and Urban Development offers free counselors that can help determine if you qualify and may work on your behalf with your lender.