The Department of Housing and Urban Development (HUD) offers three programs through the Federal Housing Administration (FHA) for homeowners to refinance: Home Affordable Refinance Program (HARP), FHA Short Refinance for homeowners with negative equity, and a traditional refinance. Refinancing through HUD has a number of benefits including lowering your monthly payments, allowing you to pay less interest, and the ability to convert a 30-year mortgage to a 15-year mortgage and build equity much faster . However, to qualify for FHA loans and refinancing you must meet certain requirements.
Determine if you’re eligible. To qualify for HARP, Freddie Mac or Fannie Mae must own the mortgage. The mortgage cannot have previously been refinanced under HARP. The loan-to-value ratio must be at least 80 percent and the homeowner must be current on the mortgage. For an FHA Short Refinance, the mortgage must not be owned by FHA, VA, or USDA. The homeowner must be upside down on the mortgage, current on the payments, and living in the home as a primary residence. To meet the requirements for a streamlined refinance, the loan must be an existing FHA loan and the homeowner should be current on payments. Also, the refinance must lower monthly payments or convert an adjustable rate mortgage to a fixed rate mortgage, and no cash can be taken out on the mortgage. Contact your loan provider to assist with determining eligibility with either of these programs.
Find a participating lender. Participation in HARP and FHA Short Refinance is voluntary and therefore not all loan providers will offer the service. Contact your loan provider to inquire about its participation in the program. Your current provider or a new provider must be approved by Freddie Mac or Fannie Mae for HARP. Only FHA approved lenders can process a streamlined refinance.
Compare rates, find the best refinance terms and apply. Though these programs require approved lenders, those lenders may vary on interest rates, costs, and associated fees. Interest rates and closing costs can change daily. So when comparing offers, be sure to compare rates and closing costs for the same day. Lenders can also offer a variety of interest rate and loan point combinations. Choose the lowest combination of points and fees for the same rate.
- Jupiterimages/liquidlibrary/Getty Images