Success with HARP

I have a friend who likes to use the line “No one’s perfect, not even a perfect fool.”  Well, for those who think the government can never do anything right, here’s an example of them getting something done well.

The Home Affordable Refinance Program (HARP) was designed to help homeowners with a Fannie Mae or Freddie Mac based loan refinance into a lower mortgage rate and payment, regardless of their current equity position.  After the recent real estate meltdown, many homeowners were left with less and in some cases no equity in their home, even though they may have put down 20% when they bought their home.  When you don’t have 20% equity, mortgage companies require Private Mortgage Insurance (PMI).  Well, if you put down 20% and the value of your home went down, traditional financing would require you to incur PMI on any new mortgage you obtained.  That meant that if you were trying to refinance to a lower rate, but didn’t have 20% equity anymore, your savings was negated by the need for PMI.

HARP was designed to take that obstacle out of the way and it’s working.  Recently, I uploaded a borrower’s application to refinance where they were “underwater” (Wall Street’s term for owing more than your home’s current value).  When I loaded in an estimated value of $300,000, the program told me that Fannie Mae’s data felt that the home value was more in line with a value of $256,000, but they were going to use my figure and the borrower could waive the appraisal.  These borrowers are going to not only save $330 a month, they are going to save $450 on an appraisal fee.  The system works!

How can you tell if your mortgage is backed by Fannie Mae or Freddie Mac?  Here are a couple of sites where you can check.

                www.fanniemae.com/loanlookup   (or call 1-800-7FANNIE, 8am to 8pm EST)

                www.freddiemac.com/mymortgage  (or call 1-800-FREDDIE, 8am to 8pm EST)

You can get all the info on qualifications and guidelines at the Making Home Affordable website program page, contact your current mortgage provider, or me.

Rent vs. Buy - Start Packing!

There are studies being done right now that are telling us taht people who are on the verge of buying a home need a little extra explanation as to why right now is the right, if not best, time to buy a home.  It is cheaper, now, to buy a home that it is to rent a home.  The chart below illustrates the flow of mortgage payments as compared to market rents since 1988.  For the first time in that time period, the payment on a mortgage for a median purchase price is actually less than it is to rent.  And let's not forget to consider the tax write off you get as a homeowner paying mortgage interest and property taxes.

As you can see, when the market hit it's height in price and interest rate, it made more sense, from a budget stand point, to be renting.  But now that the home prices and interest rates are at their current levels, the opportunity to own a home has never been better or more affordable.

A recent report done by TD Bank shows that the aspirations of young people to own their own home are still very much alive.  A majority of renters between the ages of 18 and 34 WANT or intend to buy a home. 

They're just afraid.  Of what?  Let's face it, the media doesn't sell advertising if they report sunshine, lollipops and rainbows.  Fear sells and one of the number one categories of reporting in today's news and media outlets is the "housing crisis."  Does it still exist?  Depends on who you ask.  For the purpose of this post, let's focus on the young, soon to be First Time HomeBuyer.  You have some money saved up (FHA requires a down payment of 3.5% of the purchase price and for those who qualify and wish to purchase in a rural area, the USDA still has a No Money Down program), home values are incredibly low, interest rates are at an all time low, and rents just keep going up.  You have a small family started, you need more room, and the landlord is telling you that you can't paint your daughter's room pink or you can't put that little swing set up in the yard.  Meanwhile, there are homes that you can afford, at interest rates that will allow you to pay less than your current rent.  It's time to start packing.  The quality of real estate and mortgage professionals has increased over the last several years due to attrition, licensing requirements, and plain old fashioned hard work and professionalism.  They're out there waiting to serve you and put you into a home you can afford.  Now is the time!  Don't be afraid!

FHA’s version of HARP

Many qualified borrowers who have a mortgage owned/serviced by Fannie Mae or Freddie Mac are taking advantage of the new revisions to the Home Affordable Refinance Program (HARP).  Those qualified borrowers are able to refinance to today’s lower interest rates without having to get an appraisal done.  What this means is that those home owners can refinance to a lower rate, regardless of their equity position, so if they are “Under Water” (Wall Street’s term for owing more than what your home is worth), you can not only refinance to a lower rate, you’re not required to have mortgage insurance (PMI) if you don’t have it now.

Home owners with an FHA mortgage have always been able to obtain a refinance without an appraisal as part of the Streamline Refinance process, but HUD has recently come out with a new guideline that, in a way, ties in with HARP, at least as far as the required date that you closed your current mortgage.

Provided your current FHA mortgage received it’s FHA insurance endorsement (usually within a couple of weeks after closing) prior to June 1, 2009, you are not only eligible to obtain today’s low fixed rates, you are also eligible for reduce mortgage insurance.

FHA mortgages always require mortgage insurance, regardless of the down payment.  In April of this year, FHA increased the cost of that insurance.  The Up Front Mortgage Insurance (typically rolled into the loan) increased from 1.00% to 1.75% of the loan amount.  The monthly mortgage insurance (the MI portion of your monthly payment) went from .55% to either 1.20% or 1.25% depending on your down payment.  The new guideline for borrowers with endorsements prior to June 1, 2009 is that the monthly mortgage insurance remains at .55%, but the Up Front is a mere .10%.  Compared to someone purchasing with a new FHA mortgage, that’s a substantial difference.

With FHA rates ranging from 3.50 – 4.00% given the day and market conditions, refinancing with a streamline refi can save hundreds of dollars.  And since FHA streamline mortgages don’t require an appraisal, you’ll save time as well as money.  Not sure when your loan received it’s FHA insurance endorsement?  Your current lender or the company you’re applying with can get it for you.  Refinance today, reduce your monthly mortgage payment and then take the savings out into the world to stimulate our economy!