There are various government-backed refinance programs that are designed to make the home-purchasing process easier for Americans. These programs are aimed at lowering the income and credit score requirements along with reducing the requirements associated with cash down-payments.
Here are some of the refinance assistance programs offered by the federal government of the United States:
HARP - Home Affordable Refinance Program
For people who aren’t behind on their mortgage payments but are unable to get their hands on traditional refinancing due to the decline of their home’s value, the Home Affordable Refinance Program or HARP may just be the right way to obtain refinance. HARP is specifically designed to help you in getting a new, more stable, and affordable mortgage. The HARP refinance loans involve the filling up of an application form and an underwriting process. Plus, refinance fees is applicable.
HARP or HARP 1.0 was initially made public in April 2009, allowing homeowners with some or no equity on their homes a chance to refinance their current home loans into mortgages with lower rates. These mortgages are backed by Fannie or Freddie. The existing Fannie or Freddie loan which has been acquired before May 2009 is not susceptible to LVT or loan-to-value limits. Also, while the HAPR 1.0 doesn’t work that well for individuals presently paying mortgage insurance (PMI), changes in the HARP 2.0 have allowed PMI borrowers to participate.
Home Affordable Refinance Program Application
Variations between HARP 1.0 and HARP 2.0
Following are the major variations between HARP 1.0 and HARP 2.0:
- HARP loans do not feature a 125% LVT or loan-to-value limit and no matter how under water your existing loan is, Fannie and Freddie will still accept refinances.
- In a lot of Fannie loan cases and a few Freddie loans, appraisals are being eliminated. This is done through an underwriting used by each of the companies.
- DTI or debt to income ratio requirements is also being stretched. As of spring 2012, Fannie/Freddie’s lenient underwriting software has allowed monthly debt payments to exceed the 50% monthly gross income limit.
- HARP 2.0 allows homeowners with mortgage to refinance. Though this option was available with HAPR 1.0, almost all lenders refused to allow it. Thus, Fannie and Freddie provided better grounds to lenders through HARP 2.0 as a few authorized lenders are permitting PMI/MIP transfers.
- Credit scores are not an issue with HARP 2.0 as long as the underwriting software by Fannie/Freddie favors the refinance. Although, there is a possibility that the software may decline excessively low credit scores.
The Home Affordable Refinance Program prohibits the combination of second mortgages with the first ones, though it allows the refinancing of the first mortgage with the second mortgage remaining intact. This is referred to as“subordination”.
Home Affordable Refinance Program Application
HAMP – Home Affordable Modification Program
The Home Affordable Modification Program or HAMP is designed for people who are not unemployed, but are still having a difficult time making their mortgage payments. HAMP can lower monthly mortgage payments to make them further affordable and credible in the long term.
On June 1, 2012, the Obama administration announced the expansion of the number of homeowners that may qualify for the Home Affordable Modification Program in order to provide the public with adequate solutions for their housing issues. These include:
- Homeowners who have defaulted in their payments after receiving a trial period plan of HAMP.
- Homeowners applying for a HAMP loan over a home that’s not their primary residence, though the property is rented or is about to be rented by the homeowner.
- Homeowners who have lost their good standing after defaulting on a received HAMP before for permanent modification.
- Homeowners who were unable to qualify for HAMP due to their debt-to-income ratio being 31% or lesser.
Check here Home Affordable Modification Program to find out whether you’re eligible to begin the evaluation process included in the HAMP.
FHA Short Refinance
FHA (Federal Housing Administration) Short Refinance or FHA Refinance for Borrowers with Negative Equity is a good option for people who are not behind on their mortgage payments save for owing more than their home’s actual worth. This government refinance assistance program is specifically designed for helping individuals refinance into a more stable and affordable mortgage insured by the FHA. If your existing lender consents participation within this refinance, they’ll be obliged to reduce the sum on your first mortgage to 97.75% of your home’s existing value.
In order to get your hands on the FHA Short Refinance, you’ll need to fulfill the following requirements:
- Your debt must be greater than what your home’s worth
- The house should be your current primary residence
- Your mortgage is not guaranteed or owned by USDA, VA, or FHA
- Your mortgage payments are up to date
- Your debt is not more than 50% of the monthly gross income
- You comply with the standard underwriting terms established by the FHA for new loans
- Your criminal record must not contain charges of money laundering, fraud, felony larceny, forgery, and tax evasion – associated with real estate or mortgage transaction – taking place within the last 10 years.
To understand which government refinance program is the best for you, please visit Home Affordable Modification Program. This way, you can easily make the right choice for your home and family.