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How To Refinance An Upside Down (Or Underwater) Mortgage.

Posted on | December 10, 2009 |

With mortgage rates at historic lows, it’s a great time to refinance. The only problem for many people is that they owe more than the house is worth. This is sometimes called “being upside down on the loan” or “being underwater”, but no matter what you call it you don’t want to be in this situation. But that’s exactly where a growing number of homeowners are finding themselves in the current market and economic conditions - the house is worth less than their current mortgage. This is especially a problem if you have an adjustable rate mortgage, or ARM, with an interest rate that is set to go up sometime soon.upside-down-house-mortgage

That’s where the Home Affordable Refinance Program comes into play. The Home Affordable Refinance Program (HARP) is a federal program meant to help borrowers who are underwater on their mortgage, but not yet behind in their payments.

If you’re current on payments, but your home’s value has decreased to where it is now less than your mortgage, then you may qualify for the HARP if you meet the following criteria:

  1. You are the owner of a one- to four-unit home.
  2. You have a loan owned or guaranteed by Fannie Mae or Freddie Mac.
  3. You are current on your mortgage payments.
  4. You believe that the amount you owe on your first mortgage is about the same or less than the current value of your house.

One further restriction is that your 1st mortgage cannot exceed 125% of the current market value of your home. For example, if your mortgage is $250,000 then your current market value cannot be below $200,000.

HARP is part of the Making Home Affordable Program implemented by the Obama administration to help stabilize the housing market and stem the tide of foreclosures. HARP is directed toward helping underwater borrowers refinance their mortgage, while the Home Affordable Modification Program (HAMP) targets mortgage loan modifications.

You can get more information as well as apply for the HARP by visiting the Making Home Affordable web site.

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