HARP 2.0: Your 5 steps to approval
On Nov. 15, the government will release the details to the expanded HARP refinance program. By Dec. 1, lenders are expected to be accepting applications for the "new and improved" program.
If you're among the more than 7 million who are expected to qualify under the expanded guidelines, there are several preparatory steps you need to take to ensure your application is reviewed first.
Since lenders will be crushed with new refinance applications come next month, underwriters will prefer to deal with the "cleanest" files first. There is a distinct advantage to being first in line with an underwriter--not only can your loan close sooner, you may qualify for better loan terms.
If you're among the millions of U.S. homeowners anticipating HARP 2.0, you better properly prepare. If the number of applications becomes too overwhelming, some lenders may even raise their rates to slow new, inbound applications.
The defining characteristic of the newly expanded HARP program is the allowance of an unlimited loan-to-value (LTV) ratio. No matter how underwater you are, you can still apply.
HARP 2.0 gives homeowners the ability to refinance into today's low mortgage rates without concern for private mortgage insurance, exorbitant closing costs and fees, and not even requiring an appraisal in most cases.
Beyond that, a HARP loan looks a lot like any other mortgage. Lenders are looking for borrowers with solid incomes, good assets and quality credit scores.
5 steps for your HARP preparation
Since HARP mortgages are backed by Fannie Mae and Freddie Mac, the underwriting process will resemble that of any other conventional mortgage. There will be loan disclosures to sign and supporting financial documentation to remit.
To ensure your HARP application lands on the top of the stack, you'll need to follow these 5 preparatory steps:
1. Ensure Fannie or Freddie backs your mortgage
Since day one, only those with mortgages owned or guaranteed by Fannie or Freddie could qualify. Fannie and Freddie each have a loan lookup tool which allows homeowners to search for their loan.
To check if your mortgage is backed by Fannie Mae, visit http://www.fanniemae.com/loanlookup/. If your mortgage is not found, try Freddie Mac's loan lookup at https://ww3.freddiemac.com/corporate/.
Mortgages not listed on either website are not backed by Fannie or Freddie and, therefore, are not HARP-eligible.
2. Determine if your mortgage is old enough
Only those whose mortgages were securitized prior to June 1, 2009 can apply for HARP. In general, this means that your mortgage must have started in mid-May 2009 or earlier. You can find your mortgage start date by looking at your closing paperwork. In the upper-right-hand corner of your settlement is your "funding date"--that's the date you're looking for.
Note: Since it can take up to 60 days to securitize a Fannie or Freddie loan, even if your start date is close to June 1, 2009, you still may be ineligible.
3. Does your current mortgage have LPMI?
HARP 2.0 is designed to help homeowners with or without private mortgage insurance (PMI), but the government's revisions specifically excludes homeowners that chose lender-paid mortgage insurance (LPMI).
LPMI is mortgage insurance that's built into your rate. If your mortgage statement itemized your monthly PMI, you have borrower-paid mortgage insurance and are thus eligible. All other mortgage insurance types are ineligible--including single-premium insurance.
4. You must be current
HARP 2.0 requires that all homeowners have made their last six mortgage payments on time, with a maximum of one 30-day late payment in the past year. This information is verified against your credit report, so be sure to review your credit reports prior to submitting your application.
5. Find and organize your supporting paperwork
Since HARP mortgages are underwritten like every other type of mortgage, you will be required to provide bank statements, a drivers license, homeowners insurance information, pay stubs and W-2s. If you're self-employed, you'll have to provide a few years of tax returns to verify your income.
Your speed in which you return these items to your lender can dictate your mortgage rate. If you plan on applying for HARP 2.0, gather all these items in advance. The less you leave to the last minute, the smoother your application will go.
Again, there will be a crush of new applications when HARP 2.0 is open to the public. If you're going to apply, you must follow these tips to be one of the first approved and one of the fastest to close.
Dan Green is a loan officer with Waterstone Mortgage in Cincinnati, Ohio, and the author of the nationally recognized mortgage blog, TheMortgageReports.com. Dan does purchase and refinance mortgages, including the HARP II program. Follow Dan on Twitter at @mortgagereports.