Question by Anabela: What I have to be careful if I use HARP through my bank to refinance my house?
By the way, all my previous answer were really great and helpfull. I want to do a nice research before I refinance. My fixed rate is until next year and I want to reduce my monthly mortgage of $ 1,870.00. Basically all my pay check goes to mortgage and I can’t sell it. The price of the house went down 100,000.00. Thank you
Answer by Jef
Well, you still need to qualify for the loan. While HARP has looser qualifying thresholds than most conventional refinace options, it does have guidelines for income and debt ratios. If your liabilities eat most of your income, you might now qualify.
However, starting an application is usually cheap — $ 10-$ 50 for a lender to grab your credit score and at least look at what might be going on.
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The most important thing to be careful about in the HARP program is to make your payments on time. A late payment in the last six months will disqualify you from the program. You are allowed only one late (30 days) during the last 7-12 months. For more informaton about HARP eligibility see the BIlls.com article http://www.bills.com/harp-mortgage/ .
The HARP 2.0 mortgage program can be divided into two types of loans:
1. Manual underwritten loans: Theses can be only be offered by your original lender/servicer.
2. Automated underwritten loans: These can be offered by new lenders who participate in the HARP program.
The manual underwritten loans (Fannie Mae’s Refi Plus and Freddie Mac’s Relief Refinance) have less strict underwriting criteria. This includes no DTI (debt to income) ratio requirement. An automated underwritten loan has a DTI requirement of around 45% maximum, although lenders often have stricter requirements.
Based on the information you provided, it sounds like your DTI is high and that you may not qualify for an automated underwritten loan. Start by speaking to your current lender. Don’t be surprised if the interest rate is higher than the market average.