[Ed. Note: This is a guest post from Joshua Bucio, a Senior Mortgage Advisor at Waterstone Bank. He asked us to post this and we are happy to do so.]
Some homeowners are still affected by the results of the real estate market decline that started in 2006. The value of homes declined, because of so many foreclosed homes. When the values declined, homeowners lost equity in their homes. This lost equity has affected many homeowners who are looking to refinance their current mortgage into the lower fixed interest rates available.
When a homeowner looks to refinance their mortgage today, most programs will require the home to be appraised, in order to determine the current value of the home. When the appraisal report shows a low value with today’s current market conditions, this can prevent them from refinancing. Lenders need to see a certain amount of equity available to approve a refinance. What’s most unfortunate about this is that many homeowners that have good credit, good income, very little debt and many months of liquid assets cannot get approved for a refinance. If the equity is not present in the home, the lender will not approve the refinance. The one thing that is out of the control of the homeowner is the loss in equity, preventing them from taking advantage of the lower interest rates available.
Fortunately, there is a program that can help homeowners refinance in this specific situation. It’s called the Home Affordable Refinance Program (HARP). This program was extended on December 1, 2011 for borrowers with a loan to value ratio greater than 125%. There is now no limit to how much a homeowner is underwater on their mortgage. The homeowners that have been affected the most by the loss in equity are in the sand states, like Florida, Nevada, Arizona and California. Many homeowners across the nation are affected by the loss of equity, but many are not aware that this program is available to them.
Here are some of the benefits of the program:
- Whether you have little equity, no equity or completely underwater, you would qualify.
- No appraisal report required with most situations.
- You can have a home equity line of credit or second mortgage on the home.
- You can have PMI on your current mortgage.
- Second homes and investment properties allowed.
The HARP refinance program does require the homeowner to qualify, just like any other mortgage refinance, but the biggest benefit comes from not having to worry about how much equity you lost in the property.
Learn more about the HARP refinance program.