The Pros and Cons of Harp Mortgage

There are times when the amount that you owe via your mortgage is higher than the actual value of the property. Now this could be because of the recession or due to the housing market crisis in the current scenario. If you are finding it tough to afford your monthly mortgage payments, you should try applying for HARP (Home Affordable Refinance Program).

Established by the Federal Government in 2009, HARP was designed to help homeowners refinance their existing mortgages at lower interest rates. The process is a lot simpler than the traditional refinance and requires fewer documents to qualify.

You can find a HARP approved lender to refinance your loan at a lower rate, irrespective of what your property values at. In fact a couple such lenders may even have contacted you through HARP mortgage leads. If they have, all that you need to do is compare their rates and terms, see what suits you the best and then say ‘Yes, I am interested.’ But before you do that here are a few pros and cons of HARP mortgage that you need to know:

Pros of HARP mortgage

Property Value doesn’t matter

The biggest benefit of a HARP loan is that the lender will not consider the value of your home while approving your loan application. In contrast a traditional refinance often requires an appraisal of the property to determine its current value, based on which the lender will decide whether or not to approve your loan. So, you get to save up big time on those appraisal costs by going for HARP.

Low interest rates

Since HARP is a government initiative, the interest rates at which you can refinance your mortgage through HARP are very low. This way you get to save up on your monthly mortgage payments post refinance.

Easy to qualify

The eligibility requirements in case of a HARP mortgage are very minimal as long as your mortgage is backed by either Freddie Mac or Fannie Mae. The criterion is that you should pay your monthly mortgage payments on time and this should be the first time you are applying for HARP. Even those with second mortgages can qualify for HARP quite easily.

Zero-cost refinancing

Apart from the interest rates and appraisal costs, you also get to save on the refinancing costs by going for a HARP. However, this depends totally on how good your credit score is. Also the closing costs here are much lower than the other types of loans.

No mortgage insurance

Mortgage insurance or PMI is one thing that increases the monthly mortgage payment and most of the times it is mandatory to pay this amount. The best thing in HARP mortgage is that it doesn’t require the borrower to pay mortgage insurance.

Cons of HARP mortgage

You can’t miss those payments

Making your monthly mortgage payments regularly is a main criterion in HARP mortgages. The HARP approved lenders who may contact you via HARP mortgage leads, usually require you to submit an year’s payment history to make sure you have nothing more than one late payment. So, even if you have been late on making your payments twice, you may not qualify for a HARP mortgage.

Credit score matters

Not having a good credit score means not getting good terms in HARP. This will not only hamper your chances of getting approved for a HARP mortgage it also decreases your options and cuts down your negotiating power.

Limited Terms

There is no way you can get your mortgage refinanced through HARP, unless your loan is backed up by Freddie Mac or Fannie Mae.This is one limitation that prevents many homeowners from using this program to refinance their mortgages.

Understanding the pros and cons of HARP mortgage can help you take the right decision with respect to getting your mortgage refinanced. If you stand a better chance of qualifying for a HARP mortgage you will do better by accepting the offers of one of the HARP approved lenders who come to you via HARP mortgage leads. Not only will you be lowering your monthly payments in a substantial way, you might also get a chance to save thousands by way of interest fees and other associated costs.

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