Q: I have been searching the Internet looking for someone to answer this question for me. A little over a year ago, I refinanced through my current lender, which is one of the big box lenders, as you call them.
At that time, I was able to drop our 30-year mortgage rate from 6.125 percent to a 15-year at 4.875 percent. I did this through the Making Home Affordable Program.
But now 15-year rates are at 3.75 percent. I locked in at that rate but in underwriting, I was declined because you apparently go through the Making Home Affordable program twice. Is this really true?
A: It’s unfortunate that you cannot refinance your 15-year rate again. You are limited to one refinance under the Making Home Affordable program.
According to MakingHomeAffordable.gov website, you may be eligible for a Home Affordable Refinance Program (HARP) if:
- You are the owner-occupant of a one- to four-unit home;
- the loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac;
- At the time you apply, you are current on your mortgage payments (“Current” generally means that you have not been more than 30 days late on your mortgage payment in the last 12 months; or, if you have had the loan for less than 12 months, you have never missed a payment);
- The amount you owe on your first lien mortgage does not exceed 125 percent of the current market value of your property;
- You have a reasonable ability to pay the new mortgage payments;
- The refinance improves the long term affordability or stability of your loan.
While I can’t find anything on the website that specifically prohibits you from dipping into the HARP program twice, you cannot receive two loan modifications through the Home Affordable Mortgage Program (HAMP).
Still, it’s important to remember that you were able to refinance your loan about a year ago only because of the Making Home Affordable HARP program.
If at that time your home’s value was about the same as your mortgage or even a bit below your mortgage value, you would have either been unable to refinance or would have wound up with a higher interest rate or be paying for private mortgage insurance.
If you have at least 20 percent equity in your home today, you’d be able to refinance your property with a conventional lender and without using a government program. At this point, you might want to be happy that you got the loan refinanced when you did. If your home has dropped further in value since you last refinanced, you might not even qualify for the loan under the government program now.
The one great thing about your loan is that when you have a 15-year loan, you are paying down the loan quite fast and the difference in the monthly payment between your current loan and another 15-year loan today is less than if you compared two 30-year loans.
Finally, while you’re not able to lock in at the moment on a 3.75 percent 15-year loan, 4.875 percent is nothing to sneeze at. In another few years, when interest rates rise, you’ll be quite happy you have this rate.
If the policy changes, I’ll be sure to write about it. In the meantime, you can go to MakingHomeAffordable.gov for more details.