The HARP Application Process
Expansion of the Home Affordable Refinance Program (HARP) has inspired renewed interest from homeowners suffering from underwater mortgages. With HARP 2.0, borrowers have the opportunity to refinance their mortgage with a lower interest rate and may even pay fewer fees during the process.
Many borrowers who were denied a loan through the original version of HARP would now find that the application process is shorter, appraisals are no longer required, and there are fewer restrictions on lender choice.
Applying For A HARP Loan
HARP 2.0 removed a number of impediments to refinancing, but the basic application process wasn't changed dramatically. The first step in the application process is confirming a borrower's eligibility. The federal government requires the following:
Click Here to check eligibility for HARP 2.0
Upon confirming eligibility for HARP 2.0, a homeowner must also examine his or her credit report to ensure that there have been no late payments in the last 6 months, as well as no more than one late payment in the last year. A late payment on a credit report might mean a borrower must wait to apply. In addition, a borrower must also be gainfully employed before the application process begins.
Other questions a homeowner must ask before application include:
- Will a refinanced loan lower payments or shorten the loan term?
- Does the borrower expect to remain in his or her home for several years?
The HARP Refinance Process
When a borrower submits a HARP application, the lender will examine many facets of the borrower's economic health such as credit score, current debt, and payment history. Additionally, the lender might require a certain loan-to-value (LTV) ratio that isn't required by the government.
After performing research to confirm eligibility for HARP, a borrower will need to complete the following steps:
1. Submit a pre-application
This document is a simple application that requires basic demographic information, contact details, and financial numbers like the amount of the borrower's current mortgage payment, as well as assets and income.
2. Credit check and preliminary approval
Based upon the details found on a credit report, a borrower may be required to provide further details regarding financial shape, income, and debts.
3. Submit 1003 form and supporting documentation
Many documents are required during submission of the application. Referred to as the 1003 form, a borrower is required to sign various disclosures as well as provide financial documents such as pay stubs, W2 forms, and bank statements.
4. Application submission and second mortgages
After the application is submitted, borrowers with second mortgages may need to pay additional fees for processing. Additionally, borrowers with a home equity line of credit (HELOC) may have that account frozen while HARP approval is underway.
5. Further documentation
The lender may require additional documentation before final approval is granted; however, accurate and complete submission of initial documents should reduce the additional information required as well as make it easier for the borrower to lock in a low interest rate.
6. Loan approval and acceptance signature
After a waiting period that might be anywhere from a few weeks to a few months, the lender will print official documents for the borrower to sign.
The process of refinancing under HARP requires a few months of dedication to ensure a successful new loan and an attractive interest rate. Gathering necessary documentation and keeping an open line of communication with the lender should result in a positive refinancing experience.