UPDATE: If you are looking to refinance, be sure to keep an eye on the National Foreclosure Settlement. It should be rolling out soon and you might be able to get a good deal. The qualifications are different than HARP 2.0 so you need to see which one will better for you.
It’s amazing, but mortgage interest rates keep dropping. If you are stuck with a higher rate, now is the time to refinance. The Home Affordable Refinance Program has been revamped to include more home owners and many more people should qualify for refinancing. I called around and see if we could refinance under this program and while we could, the numbers are not working out.
First let’s go over HARP 2.0
- The mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. You can check if they own your loan by following the links.
- The current mortgage must be closed before June 1st, 2009.
- No underwater limit. Under the previous program, the home loan to value (LTV) ratio must be under 125%.
- The loan must be current with good payment history over the past 12 months.
- Eliminating appraisal and underwriting so home owners do not have to pay those fees. I will have to check on this with the bank.
- If you don’t pay PMI (mortgage insurance) now, then you won’t have to pay PMI after refinancing.
I verified that our loan is owned or guaranteed by Fannie Mae so we qualified for HARP. Both of our credit ratings are excellent and we don’t have any consumer debt. Our home’s value is about the same as the loan amount right now since the price dropped so much. We are not paying PMI at this time and won’t have to pay PMI if we refinance under HARP. Our mortgage is currently a 30 year fixed rate mortgage @4.75%.
I called CHASE and after 30 minutes I got the bad news. The best they can offer us is a 30 year fixed rate mortgage @4.625%. The only thing we have to pay out of pocket is the $400 application fee. However, the refinance will cost $3,000, but they will roll that into the principle so we won’t have to pay out of pocket. I was a speechless after I heard this offer. Seriously? A 0.125% saving? That is pathetic. I see most 30 year mortgages are now at less than 4% interest rate.
I checked online and most lenders are not participating in the HARP because it is voluntary. With LTV of around 100%, the lenders do not want to take the risk. The banks who are willing to take the risk charge more points and fees and makes the loans not worth refinancing. I’ll call a few more places and see if I can get a better deal, but I am not optimistic. All the loan officers are inundated with people trying to refinance so they don’t even call back. I’ll probably have to drop by and make an appointment.
If we can refinance at around 4% with minimum out-of-pocket fee, then it would be worth it. Otherwise, we’ll just have to keep our 4.75% mortgage. Alternatively, I can put our $50,000 reserve fund into the loan and get it under 80%. This should make it easy to get the best rate and points. That is our emergency fund and I really think it is a bad idea to throw this into the mortgage. We don’t even know if the home price will start to recover in 2012.
Have you refinanced under HARP? Were you able to get a good rate? Which bank should I talk to?
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