Anyone who is looking at the Harp 2 Refinance Program, stands to benefit by a tremendous amount of money. Interest rate savings of over 1% at the minimum coupled with minimum monthly payment savings of at least $300 per month or more are very common. Because this program ignores loan-to-value, which is considered an integral component of risk in making a home loan, Fannie Mae and Freddie Mac charge risk-based pricing on these types of transactions. That’s not to say the transaction is not beneficial, but rather the inherent cost associated with these types of loans are more than what you would pay if you had a lower loan-to-value.
The two ways to get the lowest interest rate on a primary residence refinance:
1. Have middle credit score of 740 your better
2. Occupancy is a primary residence
3. Have 35% equity in the property or more
Without these three pricing characteristics, your interest rate is going to be higher especially if Fannie Mae or Freddie Mac dictate your appraised value which translates to a loan to value. For example when you apply for a Harp Refi, after receiving your financial documentation the lender will run an automated underwrite on your credit, income, debts and assets as well as an automated valuation algorithm for the property in the county and state in which it is located in. If the results come back that you don’t need an appraisal, a valuation will automatically be given that you must abide by for the purposes of securing the refinance. This also dictates the loan to value which in turn affects the pricing on the interest rate as well as the subsequent payment over time.
Harp Refinances, because of the higher loan to values will almost always contain higher rates than the interest rates being advertised online or in the media. Being upside down on a house and not being able to refinance at all verses being able to refinance a few basis points above market? The latter is a tremendous advantage the federal government is giving homeowners seeking to reduce their interest rates and monthly mortgage payments.
You can always start here with us by getting a complementary Harp 2 Refi Rate Quote– it is free.