HARP 2.0 Eligibility Qualifications

Updated on 6/17/2013

What is the HARP 2.0?

Can I refinance an underwater mortgage? Do I need to have a certain credit score? Does the property need to be a primary residence? How can HARP 2.0 help me? If you’ve read the paper or turned on the news, or are in an underwater Fannie Mae or Freddie Mac home waiting for help to come, do not worry, the cavalry has arrived. HARP 2.0 is a re-adjustment of the original HARP (Home Affordable Refinance Program) program, a mortgage tool for borrowers who could not refinance the conventional way due to a loan-to-value (LTV) ratio exceeding the value of the home (e.g. their home was underwater). This article explains the HARP 2.0 Program Guidelines & Qualifications.

The first incarnation of the new HARP back in 2009 allowed borrowers to refinance their home that was up to a 125% LTV ratio as long as the loan was securitized by Fannie Mae or Freddie Mac; which are two government-backed banking institutions for the mortgage industry.

HARP 2.0 Mortgage Refinance

With the announcement of the HARP revamp, dubbed HARP 2.0, the opportunity to refinance underwater borrowers has a chance to affect 11 million homes. However, this is a lender assumed risk; it isn’t necessarily a no-risk situation. Therefore, guidelines and qualifications have been put in place to ensure a profitable, yet affordable program to get people into a better refinance rate for their 100% or higher LTV homes. In order for you to refinance your underwater home mortgage, there are a couple of areas that you need to qualify with, they are listed below.

Is Your Home With Fannie Mae or Freddie Mac?

This is the first hurdle a homeowner must pass. Your home must have been securitized with Fannie or Freddie. And not only that, but it has to have been done prior to May 31st, 2009. If you’re home loan was not bought by Fannie or Freddie, the HARP 2.0 cannot apply to you, and even if it was bought by Fannie or Freddie, it still needs to have been bought prior to June of 2009. Also, you cannot have already taken advantage of the HARP program since May of 2009. There are other methods to refinancing an underwater mortgage, but they will not be as attractive as the HARP program. But if you’ve jumped over this first hurdle and still running towards a HARP 2.0, the restrictions get more lax. You can do a look up of your loan here:


Fannie Mae Lookup	Freddie Mac Lookup

Does the Loan to Value Ratio Matter for HARP 2.0?

As opposed to the first incarnation of the HARP program which had a loan to value (LTV) limit of 125%; meaning the loan could not exceed 125% of the value of the home; the new HARP 2.0 has no LTV limit. But you cannot utilize the HARP 2.0 program if you’re current LTV is less than 80%. Now while that’s great for borrowers, remember that this is a program done by businesses, so you will have to qualify to the lender regarding your no-LTV limit refinance. Credit, debt-to-income ratio, employment history, and other qualifying requirements will be looked at by each individual lender and approved according to their company’s guidelines for the HARP 2.0 program. Those that stayed up on their credit, are not swamped with debt, and show proof of sustainable income are in the clear and can move into the next category.

Do I Have to Have a Perfect Mortgage Payment History for HARP 2.0?

While many borrowers might have struggled making payments on-time to their lenders, it does not disqualify you outright for a HARP 2.0 refinance. In order to qualify in this segment, you mustn’t have been late on a payment at all in the previous six months, and can only have been late one time in the seven to twelve month range. Now for those who have not had the cleanest record in terms of payment history, don’t stress. The HARP 2.0 program is eligible until December 31, 2013. So even if you’re still in a rut today, you have more than enough time (12 months) to get back on track to qualify. Borrowers that aren’t quite there yet, make a realistic plan to get back on track to a perfect mortgage payment record by December of 2012. However, if you’re a borrower that can pass this hurdle, we can move onto the next section.

What If I Can’t Afford The Payments for a HARP 2.0?

Now you can refinance your 150% LTV home mortgage, but what if your payments jump from $1,500 a month to $2,000 a month. Wasn’t this supposed to help you, not make it worse? Not all HARP refinances are going to be like this, but in cases where they have an increase in monthly payments, you must only have an increase of 20% to your mortgage payment or you must re-qualify for the new loan. If you don’t increase your mortgage payment above 20%, you can skip the next section, if not, read on to figure out if you can re-qualify for the new HARP 2.0. There is more on Lender411 about HARP 2 limitations.

Is There a Minimum Credit Score Needed to Re-Qualify for HARP 2.0?

There is a minimum credit score of 620 in order to qualify for a HARP 2.0 loan. This is the middle score of the three reporting agencies of credit (Equifax, Experian, TransUnion). So if you have a 689 Equifax score, a 723 Experian score, and a 645 TransUnion score, you’re reportable credit score for mortgages is 689. The high score cancels out the low score and you’re left with the middle score. So if you have one of your credit scores below 620, don’t worry, as long as the other two are, you qualify for the new HARP 2.0.

Also, there is a maximum debt-to-income ratio for HARP 2.0 participants. If you have a debt-to-income (DTI) ratio of 45% or less, you qualify. Meaning if you’re total recurring debt (mortgage, credit cards, etc) make up 45% or less of your monthly income, you qualify. To calculate this, take your annual salary and divide by 12. Take the total of your recurring monthly debt, and divide this by your monthly income to get your ratio. Here is an example.

Annual Income (A) = $65,000
A ($65,000) / 12 = $5,416.67 = Monthly Income (M)
Monthly Recurring Debt (D) = $1,800
D ($1,800) / M ($5,416.67) = 0.3323 = 33.23% Debt-To-Income Ratio (DTI)

I Passed All of the Qualifications, Now What?

HARP Mortgage Refinance So you made it to the end of the race: your mortgage is owned by Fannie Mae or Freddie Mac, you have a perfect or close to perfect payment history for your mortgage in the past twelve months, your payments are less than 20% more expensive than the prior amount or you re-qualified for a new HARP 2.0 loan. You’ve saved your home and made things more affordable in the long-term. However, the industry is not predicting HARP 2.0 until March of 2012. Underwriting software for Fannie Mae and Freddie Mac needs to be functional first as well as individual lenders’ and banks’ software. In the mean time, try to improve your credit, decrease your debt-to-income ratio, shop for lenders and get their input on your upcoming HARP 2.0 refinance. The best way to take advantage of this program is to be completely prepared for it, as well as setting yourself up in the best financial position possible for the best rate possible. Read up on our HARP Myths page for more information.

Comments

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I am in the process of trying to refinance my home under the Harp 2 program, have excellant credit with a score of 789 and have been turned down Why just because I have credit cards with 0 balances that are being held against me,is this fair. This program was supposed to help people but I don't see how it hasnt helped me.

Hello Anyone with property located in California .. feel free to e mail me at Rmiller@cfcmb.com.If you do not qualify for HARP perhaps you may qualify for other loan programs. As for the Union Borrower. Union has their own version of streamline loan, check with them to see if you qualify. As for the borrower who meets criteria for HARP but cannot show income , check with your current lender to see if you are eligible for a streamline refi with your lender. As for the borrower with 600 credit score .. there are lenders that offer HARP for borrowers with lower scores. Need to find one that fits your parameters and check rates to see if the refinance still makes sense as your rate will be higher. Perhaps your first step is to determine why your credit is at 600. Thank you

My Lender Union Savings Bank won't offer HARP to me. I meet all of the requirements. They said since I have a Balloon type mortgage that they have made a business decision to not allow Balloon or Arm type mortgages to participate. They said if I had a 30yr fixed rate mortgage they would offer it to me. I think this is B.S. I asked for an explanation and that is what they give me. In addition they tried telling me that if they did the HARP for me and not others then it would likely be a violation of the Fair Lending Act and I said "right back at you" you are helping one class of your borrowers i.e. - 30yr fixed mortgages but not others. That seems to me to be a violation then they shut up and just said it is a business decision. I am locked into my current lender because I have the infamous credit enhancement tag that prevents me from going to another lender to utilize HARP. My wife and I are very upset and looking forward to HARP 3.0 hoping that it will help.

Some of the lenders offered an APR of 2-3%. Then they offered a "rate" of 3.4 for example. What is the APR if not the interest rate and how often would it accrue?

Credit score 751, never late on any payments, all credit cards 0 balance. Can't get HARP, debt to income ratio too high. Never mind that I'm always on time with payments. It's too high because of 2nd mortgage. They won't lower rates because I can't afford to pay them??? The 1st mortgage co. won't approve me for a modification because I can still pay my mortgage, I have a little savings that hasn't been depleted, need to be destitute, no need for emergency funds or repair funds. Isn't there a program for people like me, very poor but not yet destitute, just want to be able to afford to stay in home?

Comments My loan originated with Wellsfargo, great credit score, up to date, no late payments, by all accounts I qualify for HARP2 but Wellsfargo obviously has no intentions of honoring any efforts to comply to help people refinance. They should be investigate for constantly denying refinancing to people who qualify.

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