Mortgage refinance possible through Making Home Affordable program

By Dean Schermerhorn
Calculators for Mortgages Columnist

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Part of the Making Home Affordable program, the Home Affordable Refinance Plan (HARP) allows underwater homeowners to refinance to lower rates.

The federal Making Home Affordable program aims to help homeowners refinance when they have little or no equity in their homes. Many borrowers have kept up on their mortgage payments but could not take advantage of lower interest rates by refinancing. As housing prices plummeted, homeowners who wanted to refinance saw their home equity vanish, leaving them unqualified to take advantage of lower interest rates.

Should I Refinance?

As you make your mortgage calculations and search for the best home loan rate, consider whether the Making Home Affordable mortgage refinance is right for you.

Check the following list of qualifications. With the help of a refinance calculator, you can determine whether to apply. Be sure to note that these apply only to a first mortgage, not a second.

You own a one- to four-unit home.

Your home loan is owned or serviced by Fannie Mae or Freddie Mac.

Your mortgage payments are current.

You have not been 30 days late making a payment in the past 12 months.

Your mortgage is no more than 125 percent of the value of your home.

You must be able to make the new payments on your first mortgage.

If there is a second mortgage, the lender on your second mortgage must agree to remain in second position.

Mortgage refinance for the long haul

So now that you plan to apply, keep these points in mind:

• If your current mortgage rate is significantly higher than today's market rates, you can begin saving immediately by refinancing.
• If you have a teaser rate or are paying interest only, you might not reduce your payments.You may benefit in the long run by stabilizing your mortgage.
• You will continue to owe the full amount of the loan. A Making Home Affordable refinance, however, will save you money over the life of the loan.

Not with Fannie or Freddie? An alternative for home refinance

Even if Fannie Mae or Freddie Mac does not own or guarantee your mortgage, the Making Home Affordable program can still help you. You could qualify for a modification if all of the following apply to you:

You own and occupy a one- to four-unit home

You have an unpaid principal balance equal to or less than

• 1 unit: $729,750
• 2 units: $934,200
• 3 units: $1,129,250
• 4 units: $1,403,400;

Your first lien mortgage was originated on or before January 1, 2009

Your monthly mortgage payment (including taxes, insurance, and homeowners association dues) exceeds 31 percent of your monthly, gross (pre-tax) income

You cannot afford your mortgage payment because of a financial hardship that you can document.

Talk with your loan servicer or requestrefinance quotes to learn more about qualifying for a Making Home Affordable mortgage refinance or modification.

About the Author
Dean Schermerhorn, MA, owner of Concise Communications, lives in Reno, Nevada. He has written for banking, health-care and manufacturing businesses and articles on finance and business topics.