Whether you need a credit card to cover college expenses or a mortgage to buy a home, a high FICO score can help to lower costs.
When you owe more on your home than it is worth, you are what is called, “underwater.” Even if you sell the house, you will not have enough money to pay off the mortgage. If you don’t sell the house, the bank could offer you money to move out and leave the house in the bank’s hands. While this can be tempting, the deal leaves you with just enough cash to get to an apartment to start a new life, and a lot of years of rebuilding your finances.
Through the Home Affordable Refinance Program, you have another option.
What is the Home Affordable Refinance Program?
This program, known as HARP, is offered by the federal government. HARP helps people refinance when they are underwater on their homes.
While your previous loan applications may have been turned down by banks precisely because you owe more than the home is worth, HARP may accept your request because it is designed especially for people like you.
How can HARP benefit me?
If you are approved for a HARP loan, you will have a new mortgage that is affordable. You will not have to give up your house to become a renter, and you will have a lower interest rate. This will give you time to either fix up the house to increase its value, wait until the home appreciates in value to the point that it is higher than your outstanding mortgage, or build equity because more of your payments will go to the principal on the new loan.
How do I know if I am eligible?
You must meet eligibility rules for HARP. You are eligible if:
- The mortgage is owned or guaranteed by Fannie Mae or Freddie Mac
- The mortgage was sold to Fannie Mae or Freddie Mac on or before May 31, 2009
- The mortgage has not been refinanced under HARP, unless it was a Fannie Mae loan refinanced under HARP between March and May of 2009
- The borrower is current on the mortgage at the time of refinancing, with no late payment in the most recent six months and only one late payment in the past 12 months
- The borrower can pay the new mortgage payments
- The refinance of the loan makes it more affordable and stable
How do I apply?
You can get the process started by going to the HARP website.
You must apply for this relief, and this includes a formal loan application. That means you will need to supply at least two years of tax returns, pay stubs, a list of outstanding debts, a list of assets, and mortgage and bank statements.
When does HARP end?
This program has been extended to December 31, 2018.
If you qualify, HARP can prevent the loss of your home. You can also avoid foreclosure, and keep living in your house as you go through the loan process. Your new mortgage will give you the opportunity to build equity in your home instead of moving out and renting. However, the clock is ticking, so the time to apply for HARP relief is now.