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HARP: How it Can Work for Florida Homeowners

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The following is guest post by Annie Davis. It's no secret that I'm a huge fan of the HARP program. I don't live in Florida... it can work anywhere.

With mortgage interest rates hovering around all-time lows, many homeowners are considering refinancing. Refinancing offers a number of benefits to homeowners, provided they're in a good place to do so. One alternative to traditional refinancing for Florida homeowners is HARP (Home Affordable Refinance Program), which helps homeowners who are underwater in an existing mortgage refinance successfully without the burden of paying down principal and mortgage insurance.

HARP Helps Troubled Homeowners

HARP started back in 2009 after the housing crisis placed thousands of Florida homeowners in distress. With rising interest rates, homeowners with variable mortgage rates suddenly found that they couldn't afford their skyrocketing monthly payments. Thousands of homeowners went into default and many into foreclosure.

The U.S. Government created HARP as an alternative for helping distressed homeowners regain their financial stability, while saving their homes in the process. With a few benefits beyond those of a typical mortgage refinance, HARP is a life-saving option for many Florida homeowners. Lenders such as Foundation Mortgage help homeowners navigate the various refinancing options available and choose the program most suitable for their needs.

Underwater? No Problem

Traditional refinancing is ideal for homeowners who have a lot of equity in their properties, enabling them to cut their monthly payments, lower interest rates, and even take cash out for home improvements. But these refinancing programs don't make sense for homeowners who are underwater, which means the current mortgage balance exceeds the current value of the home.

After first rolling out the HARP program, the U.S. Government discovered that the value limitations (which required the loan-to-value ratio to fall between 80 and 125 percent) meant that many homeowners couldn't take advantage of the program. Changes that rolled out in 2011 meant that more borrowers can refinance their mortgages, regardless of how much their home decreased in value. However, this is true only if you opt for a fixed-rate mortgage. If you refinance to an adjustable-rate mortgage, you're limited to 105 percent of your home's value.

No Mortgage Insurance

Most mortgage lenders require mortgage insurance if the borrowed price is more than a certain percentage of the home's value, typically 80 percent. That means homeowners who finance the full purchase price of the home usually pay mortgage insurance, which adds up to a few hundred dollars to the monthly mortgage payment.

Homeowners refinancing through HARP aren't required to carry mortgage insurance as long as they didn't have it with the previous loan. This applies regardless of whether the loan-to-value ratio exceeds 80 percent.

Fannie Mae and Freddie Mac-Backed Loans

HARP is specifically designed for mortgages currently backed by either Freddie Mac or Fannie Mae. Homeowners with FHA loans or VA loans have other refinancing alternatives which also help distressed homeowners get back on track with their home loans. There's a difference between a loan servicer and a loan backer.

To find out who holds your mortgage, check with Fannie Mae's Know Your Options and Freddie Mac's websites.  Many mortgage loans not backed by FHA or VA are held by one of the two. If your loan doesn't show up in a search on either site, you're not eligible for HARP.

Consider Closing Costs

The HARP program eliminates some of the fees typically applied to high-risk loans, if borrowers refinance for a shorter-term mortgage. But borrowers using HARP still incur closing costs, making this cost-to-savings ratio a major factor in whether refinancing is really worth it. Borrowers save somewhere between $150 and $300 per month with HARP, provided that the upfront closing costs don't wipe out any potential savings.

Closing costs range between $600 and several thousand dollars, depending on the loan value and interest rate. HARP usually works best for homeowners who originally obtained loans with interest rates between six and eight percent.

No Appraisals in Some Cases

If your current lender offers HARP, refinancing through the same lender sometimes means no appraisal is required, under certain circumstances. If your current lender doesn't offer HARP or you choose a different lender for refinancing, a new appraisal is usually necessary. A new lender also re-underwrites your loan, where an existing lender often does not.

Using your existing lender streamlines the refinancing process and often makes it quicker. If you're in dire financial straits and you need an immediate solution, sticking with your current lender is a good idea, if possible. Eliminating appraisals and other documents cuts down on closing costs, too.

If you're considering a HARP refinance loan, consult with a reputable Florida mortgage and refinance specialist, evaluate your personal financial circumstances, the value of your home, and the current interest rates. A Florida mortgage specialist helps homeowners create a cost-benefit analysis, including the number of months or years it takes to recoup your closing costs through savings in reduced monthly payments.

Posted on September 4, 2013.

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Mortgage, Real Estate

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