HARP, a program designed to help borrowers after the financial crisis in 2009, expired in 2018. If you have little to no equity in your home, but want the benefits of a refinance, there are other government programs out there for FHA, conventional, USDA and VA loans.
A refinance can help lower your interest rate, shorten your loan term, lower your monthly payment or switch from an adjustable-rate mortgage to a fixed rate — even if you have little to no equity.
Background on the HARP loan program
Home Affordable Refinance Program (HARP) was a federal mortgage refinancing program set up by the Federal Housing Finance Agency in 2009 to help homebuyers struggling to pay their mortgage.
The program helped homeowners who consistently paid their mortgage, but had little or no equity take advantage of low interest rates with a refinance. The program helped millions of homeowners and expired on December 31, 2018.
Fannie Mae High LTV Refinance Loan
Fannie Mae’s HARP replacement is the High Loan-to-Value Refinance Option (HIRO). This program helps homeowners with little or no equity to refinance their mortgage for a lower interest rate. This may be a good option for someone with a conventional loan looking to refinance and has a high loan-to-value ratio of at least 97.01%.
Here are a few basic HIRO loan eligibility requirements:
A mortgage originated on or after October 1, 2017. Take a peek at your loan documents to see when you closed on your mortgage.
Must be an existing Fannie Mae mortgage. You can use Fannie Mae’s Lookup Tool to see if Fannie Mae owns your loan.
A refinance where you clearly benefit. Fannie Mae wants to see at least one benefit from the refinance, such as a lower monthly payment, a shorter loan term, a lower interest rate or a replacement of an adjustable-rate mortgage with a fixed-rate loan.
A minimum loan-to-value (LTV) ratio set by Fannie Mae. For example, you’ll need an LTV of at least 97.01% for a one-unit principal residence.
A few key features of a HIRO loan are:
Mortgage insurance (MI) is transferred to the new loan. If your existing mortgage doesn’t have MI, it’s not required.
Simplified documentation for income, employment and asset verification.
Both automated and manual underwriting available.
FHA Streamline Refinance
Those with an FHA loan could consider an FHA Streamline Refinance. This program could be an attractive option for homeowners with little to no equity because homes that are underwater (you owe more than what your home is worth) are still eligible.
The requirements of a streamline refinance include:
Must be an existing FHA-insured mortgage.
Mortgage must be current. The FHA won’t refinance your mortgage if it’s delinquent within three months from application.
Refinance demonstrates a tangible benefit. The benefit can vary depending on the loan type, interest rate and new loan term.
A streamline refinance features:
A new application with a credit check, or limited credit documentation and underwriting for those with poor or no credit.
May not require an appraisal.
210-day waiting period between mortgage closing.
VA Interest Rate Reduction Refinance Loan (IRRRL)
If you have a VA loan, the IRRRL may be a good refinance option, especially if you have little to no equity in your home.
IRRRL Eligibility Requirements:
Hold a current VA loan
No more than one 30-day late payment within the past 12 months
Refinance passes the net tangible benefit (NTB) test
Certify that you currently live or previously lived on the property
VA IRRRL features:
No minimum credit score or appraisal
No private mortgage insurance
May refinance up to 100% of the home’s value
USDA Streamlined Assist Refinance Loan
The Streamlined Assist Refinance is designed for USDA home loan borrowers with little to no equity in their homes.
Here are a few eligibility requirements to apply for this program:
Mortgage must be a USDA direct and guaranteed home loan
Mortgage must be current for the past year
Applicant’s income cannot exceed the limit within area where the property is located
Refinanced interest rate cannot exceed the rate on the existing mortgage
Minimum savings of $50 to principal, interest, homeowners insurance and real estate taxes (PITI) payments compared to your current monthly payment
The USDA Streamlined Assist Refinance features:
No new appraisal, except for borrowers who received a subsidy on their initial mortgage.
No credit review, home inspection or debt-to-income (DTI) ratio calculations.
Properties that are no longer in an eligible rural area are still eligible for a refinance.
How to apply for a HARP loan program alternative
Follow these steps to apply for one of these loan programs:
Find a lender that offers a HARP alternative.
Fill out the loan application detailing your personal information.
Provide supporting documentation.
Review the new loan terms and compare payments to your current mortgage.
Get a home appraisal, if required.
If your lender approves your refinance request, pay the closing costs and close on the loan.
Differences between HARP and the other loan programs
There are a couple of differences between the HARP loan program and these new refinance options.
Homeowners who applied for HARP could only use the program once. These alternatives don’t generally limit how many times you can use them, though there may be a waiting period or eligibility criteria.
Also, the HARP program didn’t have a waiting period between the date you closed on your mortgage and when you applied for a refinance. But waiting periods help lenders see a positive payment history, so loans like the FHA Streamline Refinance require homeowners to wait 210 days from your last closing before applying.
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Bottom line
You can refinance your mortgage even if you’re underwater on it or have little or no equity in your home. Each loan program has specific eligibility criteria to make sure that a refinance can really help. Use a mortgage refinance calculator to estimate how much you can save and shop around to see what refinance programs you may qualify for.
Frequently asked questions
Maybe. According to the Federal Housing Finance Agency, if Fannie Mae or Freddie Mac owns your HARP loan and your mortgage was originated after October 1, 2017, you may be eligible to refinance again under the Fannie Mae High LTV Refinance Program.
Freddie Mac Enhanced Relief Refinance (FMERR) was Freddie Mac’s HARP Replacement program that expired on September 30, 2019.
The Home Affordable Modification Program (HAMP) was a loan modification program that expired in 2016 that altered the terms of a mortgage, such as a loan repayment term or interest rate.
Kimberly Ellis is a personal finance writer at Finder, specializing in banking and financial literacy. After teaching in public and private schools, Kimberly zeroed in on personal financial education to help families and kids develop lifelong money skills. She hails from New York City, graduating summa cum laude from Queens College with a BA in elementary education and mathematics, as well as a New York State teaching certificate. She’s also an aspiring polyglot, always in a book and forever on the hunt for the perfect classic red lipstick.
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