If you live in or own real estate in Sonoma County and need to refinance, the Harp 2.0 Refinance Program could be just the ticket to successfully reducing your interest rate and monthly mortgage payment. The Making Homes Affordable Program lifted their maximum loan-to-value requirements on March 18, 2012 for loans owned by Fannie Mae and Freddie Mac. In other words, if your loan is owned by either entity and your loan is eligible, you could be 1000% financed and your refinance loan will not be denied based upon valuation.

In order to qualify for the Harp 2.0 Refinance the following parameters must be met:

• Loan must be owned by Fannie Mae or Freddie Mac. To do a look-up visit http://www.fanniemae.com/loanlookup/ or https://ww3.freddiemac.com/corporate/.
• Loan must have been originated no later than June 1, 2009.

As long as these parameters are met, you are eligible for the refinance program. It does not matter if your Sonoma County home is a primary residence, second home, vacation home or an investment property.

Q & A On Refinancing With HARP 2.0 In Sonoma County

Q: I heard I can refinance with this program and not need an appraisal is this true?

A: This is determined upfront by Fannie Mae or Freddie Mac which ever entity owns your loan. It’s a 50-50 shot of getting a full appraisal waiver. Lately, Freddie Mac loans have provided appraisal waivers nearly 100% of the time. Fannie Mae loans are a roll of the dice. When you apply with a mortgage lender for the Harp 2.0 Refinance, they will run your credit, debt, income, and assets into an automated underwriting model provided to them by Fannie Mae and Freddie Mac.

It’s sort of like Google, but for mortgage lenders, to determine credit risk up front and to see whether not the loan is approved for loan origination. If the lender computer provides that no appraisal is necessary then, an appraisal is not necessary. Sometimes the results come back where only a drive-by appraisal is required. A drive-by appraisal is approximately half the cost of a normal appraisal. So assume about $250 for a drive-by appraisal and $500 for a full full appraisal report. If it is determined, that a full appraisal is needed, your loan will not be denied based on that evaluation.

For example we are in the process of originating a loan for a client who owes $175,000 on his house. His loan is owned by Fannie Mae and his interest rate is 6.375%. It was determined by Fannie Mae’s that an appraisal was required for the transaction. The appraised value came in at $80,000 making his loan to value a whopping 218%.

In other words, he is 218% financed on his house and his upside down and he is still eligible for a new 30 year fixed rate mortgage at 4.125%. He is quite satisfied.

Q: Can I refi my investment property and go from a 30 year mortgage to a 15 year mortgage under the HARP 2.0 Refi Program?

A: The short answer, yes you may. If you plan to conduct this refinance, your Sonoma County home can be a primary residence, second home or an investment property. The eligible occupancy on this program does not matter. However, by moving forward with the refi, there must be a net tangible benefit. The most common net tangible benefit on this program is interest rate and payment reduction, however, following net tangible benefits are also permitted:

• Reducing the amortization period
• Replacing an adjustable-rate mortgage, interest only or balloon mortgage with a fully amortizing fixed rate
• Reducing monthly principal and interest payment on the new first mortgage whether or not a second mortgage is in place
• If the payment rises as a result of the changing of amortization terms or product type, your loan is still eligible for refinancing- for example going from a 30 year fixed rate amortizing mortgage to a 10 year fixed rate amortizing mortgage, the payment on the 10 year fixed rate mortgage will be substantially higher, it is permitted so long as Fannie Mae or Freddie Mac approve it.

Q: Can finance my closing costs or do I have to pay them with funds to close?

A:  Yes, you can finance all closing costs including pre-paid taxes and insurance and discount points if your loan is owned by Fannie Mae. You can do the same if your loan is owned by Freddie Mac, however, Freddie Mac has a $5000 cap . In other words, the new loan amount on a Freddie Mac loan, cannot exceed $5000 from the principle payoff amount of the loan being refinanced. If the total closing costs are more than $5000, this money will need to be brought to the closing table by the borrower.

Q: I saw 30 year fixed-rate mortgages at 3.67% how come you’re quoting me 4.25%?

A: The HARP 2.0 refinance is geared towards homeowners who owe more than their homes are worth. As a result, anything over 80% loan to value has what’s called a low-level pricing adjustment. It is simply a premium the lender requires for taking on the added risk of originating a loan above 80% loan to value. if your loan you’re trying to refinance is above 80% loan to value or even above 100% loan to value there is added risk the lender inherently takes on and passes to you the consumer.

This is why interest rates on the HARP 2.0 Refinance, while competitive, will always be slightly higher than advertised rates you see on the internet or hear about on the radio. Usually, in most cases, those interest rates are for borrowers who are financing a primary residence only, have an extremely low debt to income ratio like 36% or lower and have a middle credit score of 780 and have an impeccable credit profile.

Q: Do I still have to actually qualify for the loan? Are there any stated income options available? I heard that my bank can do the Harp 2.0 Refinance for me, without needing any income information, is this true?

A: Make no mistake, you still have to qualify for this mortgage loan. You have to prove an ability to repay which includes providing full income documentation including tax returns, pay stubs & w2’s, and providing asset information including bank statements and/or retirement account statements. Your debt to income ratio on HARP cannot exceed 45%. This is the “biggie” when qualifying for this type of mortgage loan because of other monthly debt obligations including credit cards and auto loans. These obligations limit borrowing power which in turn raises the debt to income ratio when trying to qualify for a home loan.

Mortgage Tip: Some banks who service (collect monthly mortgage payments) and originate loans may have the internal ability to refinance loans without income documentation under HARP 2.0, however, it is a guarantee that bank/ lender will place very stringent qualifying guidelines on the program, thus limiting the majority of people looking for payment relief.  For example if there is a bank out there that will originate a Harp 2.0 Refi, and they don’t require any income documentation, they will almost certainly have a maximum loan to value requirement or more a restrictive debt to income ratio guideline. Our advice? Work with a local mortgage lender that requires the full income documentation because that way you have the absolute best chance of qualifying for a maximum net tangible benefit.

Q: What happens to my refinance if I have first and second on my home?

A: The mortgage lender you chosen to work with will have to request a subordination of your second mortgage. Your second lien holder lender will need to agree to allow a new first to go into first position on your home. As long as the second lender signs off on a new subordination, you should be able to complete your refinance.

It is the sole discretion of your second lender to allow the transaction to take place. Most of the transactions we’ve been working on have not been a problem. It is in the best financial interests of the second lender to agree to the subordination despite the loan to value because it supports long-term repayment of that loan.

Q:  I bought my home in 2010 with an FHA loan, am I eligible for this refinance program?

A:  Not at this time. The Harp 2.0 Refi is for loans originated on or before June 1, 2009 that are owned by Fannie Mae or Freddie Mac and that are non-government insured, by government we mean FHA Loans, VA Loans and USDA Loans.

To be eligible the loan must be a standard conventional/conforming loan and it must be a first mortgage. The maximum maximum new loan amount can be up to $520,950 on the refinance loan in Sonoma County.

There is one caveat to this program- for FHA Loans originated on or before June 1, 2009, those homeowners are eligible for lower mortgage insurance premiums on FHA Streamline Refinances which automatically require no appraisal report. So homeowners with present FHA loans in place for the last three years should look into the possibility of refinancing.

Q: I owe several properties which are all owned by Fannie Mae or Freddie Mac. Am I eligible to refinance all of these properties under HARP 2.0?

A: Yes, you are eligible. There is no maximum property limits than otherwise allowed by Fannie Mae and Freddie Mac. Most local mortgage lenders including us, have the ability to finance up to 10 properties. There is a pricing adjustment to these properties due to be assessed risk the lender is taking on by financing more than four properties. At the end of the day, it can be done.

Where To Get The Lowest Possible Mortgage Rates On Refinancing With Harp 2.0

Q: I keep getting telemarketing calls from my current mortgage lender offering to refinance me under Harp 2.0. Should I work with them directly since they already own my loan? They keep telling me “It would easier to work with us because we already have your mortgage loan” Is this true? Where should I go to get the best possible interest rates?

A: It is a really clever marketing ploy that consumers often times believe, nothing could be further from the truth.

If your current mortgage lender is calling you to refinance your mortgage loan you already have with them, know this: you’re likely paying a higher rate of interest than current market.

Think about it, if you’re paying an interest rate 5% or over on your current 30 year mortgage, and you can pay them off and get a new rate of 4% or lower, why would they want you to refinance when they’re making a higher premium off the interest you are paying on money they lent you?

The reason is simple, they know mortgage interest rates are lower and they know they are going to lose your business anyway if they don’t call you first. So they figure if they can get to you first by offering you a refinance opportunity before anyone else does or before you research it yourself, you’re more than likely to go with them right?

Your current mortgage lender/servicier knows rates are lower, they risk losing you as a customer, they might as well earn some revenue by originating your new loan which might end up going back to them in the secondary market, anyway.

Some characteristics to watch out for:

• Are they pushy?
• Are they requiring an upfront fee?
• Are they being salesy?

*Mortgage Tip:  let’s get real, you current lender as zero obligation to give you the lowest mortgage rate possible you qualify for, so be assured, they’re offering you a refi opportunity, to make money.

Know that shopping that rate elsewhere IS IN YOUR BEST FINANCIAL INTERESTS.

As for whether not the process is made easier by working with your current mortgage lender…..

Once again this is another clever pitch banks offer consumers. In order to qualify for a refinance, whether a standard traditional Sonoma County Refi or a HARP 2.0 Refi, you need to provide your income documentation and most recent pay stub’s and a full financial package.

Your bank does not have this information saved. They will not tell you this, but they don’t, and they will need this information from you just as though any mortgage lender that you researched yourself would too. Get at least a second opinion on a refinance opportunity with another lender, preferably a local lender that knows the Santa Rosa Mortgage market/real estate market well.

The ideal mortgage provider is usually a mortgage lender that has the ability to originate loans and sell loans directly in the secondary market. These are the market lenders who work with multiple investors who ultimately deliver the loans to Fannie Mae or Freddie Mac. This assures you’ll receive fair competitive mortgage terms when seeking the lowest possible mortgage rate on your refinance.

If you live in Sonoma County, and prefer working with a local Santa Rosa Mortgage Lender, we can help. Let us give you a free complementary mortgage rate quote today. Learn about HARP 2.0 Refinance: Get The “Real” Scoop