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New HARP Refinance Program

by Mark Rieger, Mark Rieger Realty

 

The new Home Affordable Refinance Program (HARP) that will allow many underwater homeowners to refinance their homes is being modified. HARP was first introduced in 2009; however, not many homeowners utilized its benefits. The new HARP program will allow more underwater homeowners to qualify and take advantage of the program.

What are the qualifications?

  • Borrowers must be current on the mortgage at the time of the refinance, with no late payments in the past six months and no more than one late payment in the past 12 months;
  • Fannie Mae or Freddie Mac must back your loan;
  • You must be currently employed and have a steady income;
  • The mortgage must have been transferred to Fannie Mae or Freddie Mac no later than May 31, 2009; and
  • The mortgage must be on a one-to four unit dwelling that serves as your primary residence.

You are not eligible for HARP if your mortgage is FHA, USDA, or a jumbo mortgage.

It’s important to remember that HARP will not delay or stop foreclosure on your home. HARP is meant to give homeowners who are currently employed, current on their mortgages, and have lost home equity a chance to refinance at the current low mortgage rates.

Borrowers will be able to take advantage of HARP even if they owe more than what their house is worth. The previous version of HARP only allowed borrowers to refinance up to 125 percent of the home's appraised value. Millions of borrowers couldn't benefit from HARP when it was first introduced because of that cap.

HARP has been extended through Dec. 31, 2013. Fannie Mae and Freddie Mac will send instructions to lenders by November 15, 2011. Some lenders may start offering refinances under the improved HARP by December 1, but the timing may vary, according to the FHFA.

If you're an underwater homeowner, this new version of HARP could finally allow you to refinance your mortgage at an all-time low interest rate you’ve heard about but couldn’t qualify for.

Consider Refinancing to Lower your Interest Rate

by Mark Rieger, Mark Rieger Realty

 

You keep hearing that NOW is the time to refinance because interest rates have never been lower. It’s true that interest rates are at an all-time low. Refinancing can be a great option if you’re looking to lower your interest rate, but there are some things to consider before making that decision.

It’s important to realize that when you refinance your current mortgage, you are essentially entering into a brand new mortgage loan agreement, so ask yourself the following questions:

 1. Can I lower my interest rate enough to pay for the closing costs in a reasonable amount of time?

It’s important to remember that as with any new mortgage loan, there are closing costs associated with refinancing your current mortgage. According to Dave Ramsey, “A refinance makes sense when you can lower your interest rate enough to pay for the closing costs before you plan to Sell your home. Here’s a simple example. If you have a $100,000 mortgage and you can lower your interest rate by 1% in a refinance, you’ll save $1,000 a year. If your closing costs are $3,000, it will take three years to break even on your refinance.”

Before making the decision to refinance, know what the closing costs are going to be. Closing costs usually include fees associated with: survey, appraisal, title search, title insurance, realty transfer taxes, legal services, messenger or delivery services, document copying, etc.

In general, refinancing your home loan could be worth it if you can lower your interest rate by at least one to two percent. Refinancing probably doesn't make sense if it’s going to take 5 years or more to get your closing costs back.

2. How much longer do I plan on staying in my home?

Refinancing is not the best option if you don’t plan on staying in your home for at least a few years. Most likely, if you Sell your home soon after a refinance, you won’t recoup the refinancing costs.

If you currently have a high interest rate and you plan on staying in your home for a few years, refinancing right now may be a great option for you.

As always if you have any questions, or if you or someone you know is looking to Buy or Sell real estate in the  Central Oregon area, please let me know.

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