Home Loan Refinance or Mortgage Modification: Is HARP or HAMP Right for You?

A traditional refinance, a Home Affordable Refinance Program (HARP) refinance, a Home Affordable Modification Program (HAMP), or a non-government modification–these are all options for improving your mortgage interest rate. But which is right for you? The HAMP program offers the best deal if you qualify–think of it as a refinance with a rate as low as 2% at almost no cost to you.

HAMP Help

HAMP is there to help homeowners with hardships avoid foreclosure. Qualifications include:

• House is your primary residence
• Mortgage is less than or equal to $729,750
• Mortgage taken out before January 1, 2009
• Total house payment exceeds 31% of household gross monthly income
• Hardship — a substantial loss of income or increase in expenses that’s not your fault AND
• Sufficient income to make a modified payment

If you qualify, contact your lender. Document your income, assets, debts, and hardship to get a trial modification and hopefully a permanent one. The average HAMP modification saves borrowers about $500 a month.

HARP Refinance

HARP is for borrowers who would be qualified to refinance except that they lack sufficient home equity. You can owe up to 125% of your home’s current value and still refinance under HARP. To qualify:

• Your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac
• You can’t have been more than 30 days late on your mortgage payment in the last twelve months
• Your first mortgage can’t exceed 125% of the value of your home

If you qualify, contact your loan servicer about a HARP refinance. You can get a HARP refinance from any Fannie Mae or Freddie Mac lender as long as your application is approved by Fannie’s Desktop Underwriter or Freddie’s Loan Prospector automated underwriting systems. If not, only your current lender can approve you under HARP. Another obstacle is mortgage insurance–with a new lender, you may not be able to obtain it.

Non-Government Help

If you don’t qualify for HAMP and don’t need HARP, a regular refinance may be your best bet–it allows you to shop for the best rate. An FHA refinance might be your best shot if you don’t have much equity.

Finally, if you’re having mortgage trouble but can’t get HAMP (say your house is a rental), call your lender. Homeowners get modifications when the lenders feel that they will lose less with modification than foreclosure.

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Why and How to Refinance with Bad Credit

Over half of Americans are buried in debt and desperate for some help in gaining control of their outgoing money, while finding ways to keep enough to pay the bills. What was once considered impossible, refinancing with bad credit can now be done without the overwhelming hassles.
A bad credit refinance could actually help your credit in a number of ways.

• With the many other default loans on your record, refinancing to deal with it will show that you have taken steps to take control of your situation. This proves to other lenders you are capable of making the right decisions with your money.
• Refinancing means that you are aware of your financial problem and would like to start putting some of your money, now going to interest, in places that will really raise your credit score.
• When exploring the options of refinancing with bad credit you will notice that most lenders are happy to consolidate, meaning you only make one payment a month. No more late payment penalties, miscalculated interest, and keeping up with too many statements; bad credit refinance and you will be taken care of.
• Some people can actually refinance and get a lower interest rate at the same time. This can be a blessing when it comes to having a little extra cash saved up at the end of the year.

Now that you know how refinancing could help you with your debt situation you need to know what it will involve. The truth is, you will be surprised at how easy it really is but don't expect it to be free. Bad credit refinancing usually costs a little, but getting your score up and under control will be well worth it. Here are a few of the things you may need to know before applying for bad credit refinancing.

• Interest rates when refinancing with bad credit are typically much higher. If you are looking into consolidating this may be worth it but otherwise you should make sure it won't be worst then your current interest rates.
• When refinancing with bad credit there will more than likely be fees to pay, along with penalties of paying loans off early or in one lump sum. You should explore all your options and investigate each loan thoroughly before heading to the bank.
• Loan application fees are standard whether doing a bad credit refinance or you have perfect credit. Check into several lenders before choosing the one that fits you best. You can easily explore your options further online.

The bottom-line is you never know what you may be able to do until you try. With the great competition between lenders, more are willing to assist you in refinancing with bad credit just to have another consumer on their side. Investigate all the possibilities and you will more than likely find the perfect lender to help you out.

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Watch Out For Refinancing Costs and Fees

Refinancing your home can often help ease the burdens of interest you currently pay but you must also be aware and recognize all of the refinancing costs that could put you out in the short-term. When working to refinance your home, it should be thought of as starting from square one meaning refinancing costs will be similar to those when first buying the home. All appraisals, inspections, and loan applications will still be required meaning you must pick up these as part of your refinance costs.
When preparing to refinance there are several things that will determine the overall refinancing cost. First you must take into consideration:

• The length of time you have spent in your home : This will be important when lenders view your past record of payment, ability to stay on time and up to date, and some lenders even place guidelines on how long you must be in the home before refinancing.
• The remaining balance on your original mortgage : The typical rule of thumb is the higher your remaining balance the higher the refinance cost will be. This is due to fees, penalties, and interest amounts.
• The value of your home in today's real estate market : This will be one of the key elements to determining your refinancing costs as it changes very quickly and could be much higher or much lower than the original price.

After going over your current loan status you will be required to pick up the costs that are involved in the initial home buying process. Some of these costs and fees include:

• Licensed Appraisal Fee: $250 - $600
• Loan Application Fee: $75 - $300
• Land Survey Fees: $124 - $300
• Attorneys Fees: $75.00 - $200.00
• Title Search & insurance $400.00 - $600.00
• House Inspector: $175.00 - $350.00

The final steps to determining the refinance costs will include the additional costs involved with most refinancing such as:

• Early Payoff Penalties and Fines : Many, if not most, mortgage companies set in a place fees for paying your mortgage off early. This will be your burden and will have to be paid before moving any further in the process.
• Remaining Balance Costs : Some mortgages will not pay your interest amount off for you, leaving it as another amount to add to your refinance cost.
• Homeowners Insurance : If your homeowners insurance will be added into your monthly payment it will typically not be a part of your refinancing costs but for those paying annually it will need to be taken care of.

One thing to keep in mind when exploring the option of refinancing is that the final refinancing costs will be determined by each individual situation with the list outlined above only serving as a general idea. Each area, lender, and market will represent different policies with unique fees. While refinancing costs are well worth it in the long run, some may find the refinancing costs due up front are not in their budget. Regardless, it is important that you investigate all of your options before signing any binding documents.

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What Are Some Average Closing Costs?

When you are considering buying a home, you may wonder what are the average closing costs to get that home. Many want an idea of how much to save for these costs. It would be a shame to have the down payment saved for and then find out you need more money saved for the closing. This article will talk about what are some of those average closing costs.

First let us discuss there are two types of closing costs. You have non-recurring fees which are your one-time fees associated with closing your mortgage and those recurring costs that are also called prepaids. Many times non-recurring fees can be negotiated. Whereas the prepaids usually are not negotiable.

Remember you can only get an idea of the costs for these fees. From place to place they can be different. So do not look at these prices as set in stone. They are just to give you a picture of what to expect. You should find these listed on your Good Faith Estimate.

Below are a list of some of those non-recurring one-time fees for home closing costs:

• Application Fee - This is a fee that the lender requires to get your application started. This fee can include your credit report. They can range from $100 to $400. This fee is negotiable.
• Origination Fee - This fee is for the work of preparing your loan and is sometimes referred to as "points". Your loan officer is usually paid from this fee. You can expect a range of 1% to 5% (or 1 to 5 points) of the loan amount for this fee. Definitely negotiate this fee.
• Mortgage Discount Points - The name for this fee can be confusing. When you hear the word discount you think you are getting a bargain or something being lowered for you. These fees are paid to buy you a lower interest rate. So it is money you put up front to lower your rate. In a since it is a bargain when you consider you will pay less interest for your loan. Where it is confusing is you put money up front to get this bargain. Mortgage discount points can range from.5% to 2% of the loan amount. Be sure to negotiate this fee.

Now consider those average closing costs that are recurring costs, referred to as prepaids:

• Property Taxes - Depending on when you close your loan and when the seller paid his property taxes, you may have to give the seller back some money. How does this work? Keep in mind taxes are paid in advance. So if the sellers taxes were due February 28th and that paid him until July 31st, but you closed on the home May 30th. You would then owe from May 30th to July 31st to the seller. But that may not be all, the lender may collect from you the taxes due for the remainder of the year, that is from July 31st to December 31st at the closing. See why these are called prepaids! These costs cannot be negotiated. Although some sellers are willing to help in this area to help with closing the loan.
• Homeowners Insurance - This is insurance to cover any loss or damage to your home. Your lender will want this paid for at the closing. These policies can range from $300 to $1,000 depending on where you will live. Shop this fee to be sure you have the best price. Do this shopping before closing.

All of these loan closing costs are itemized on your Good Faith Estimate (GFE). By law this GFE is to be presented to you by the lender within three days after your application is accepted. Be sure to read this carefully and ask questions if you are uncertain what the fee is for.

Keep in mind your final GFE may the higher than the original one presented to you. This is because some of those final closing costs may be different. So do not be alarmed. Some fees were estimated to give you an idea of the cost. Then the actual bill for that fee may be more. Thus the GFE will reflect that. Still you will want to watch out for those unnecessary closing costs.

These are just some of the average closing costs you will find to close on your home mortgage. Do your homework ahead of time so that those fees that can be negotiated - are negotiated. Endeavor to not pay any more fees than you have to close on your home.

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Cut Costs With Home Refinancing

Home refinancing often makes good financial sense, but it's important to understand the basics to make sure you obtain the best rates and terms. Learn how with these home refinancing tips designed specifically for today's difficult economy:

Home Refinancing Tips

• Keep good credit. Although it is possible to get home refinancing with less than perfect credit, a good credit score is helpful to obtain the best rates. Obtain a copy of your credit score three to six months in advance to have plenty of time to review it for errors prior to actually applying for refinancing.
  
• Shop for rates. Compare the total cost of home refinancing including interest rate, closing costs and other fees to find the best deal. It's also a good idea to sign up for an email alert to be notified when rates reflect your target interest level then Lock-in a rate as soon as possible. Remember, rates can change rapidly so be prepared to act quickly. Work with a broker or online quote agency to locate the best rates for your area.
• Keep your home in good repair. In order to refinance the bank will perform a current appraisal as well as inspection and/or survey; depending upon how recently the home was purchased one or all of the above will be necessary. Make sure your home looks its best in order to appraise at a high enough value to reflect equity in the home. This is especially important for homes located in markets which have experienced dramatic drops in the market value of homes over the past 18 months. By keeping your home in good repair and performing regular maintenance it will be more likely to show a strong appraisal value.

• Compare the total cost of home refinancing. When comparison shopping for home loan rates it is important to compare the interest and additional fees including closing costs, appraisals and other related expenses. Points that you pay in order to reduce the interest rate can also add thousands to the final cost. Many seemingly low interest rates actually require the homeowner to purchase points in order to obtain that favorable interest rate. In some cases, what appears to be a higher initial rate may actually cost less in the long run if you don't need to purchase points. Take time to closely compare both the long term interest rate and APR or annual percentage rate.

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When to Refinance Your Home Mortgage

For many people, the ability to refinance your home may reduce monthly expenses and actually improve credit all at once. Contrary to what you might think, refinancing is still a viable option for many homeowners. Determine if it's a good idea to refinance your home with this quick quiz:

Should You Consider Mortgage Home Refinance?

1. Are the current mortgage interest rates at least 1 point less than your existing mortgage interest? If so, refinancing your home mortgage might make sense. If interest rates are lower now by 2 points or more than when you bought your home, you should definitely look into refinancing.
2. Do you currently have an adjustable rate mortgage, negative amortization or interest only loan that is due to reset or which isn't building equity? If so, today's historically low mortgage interest rates make it a great time to refinance a home loan and lock in low rates on a standard mortgage refinance loan with a fixed interest rate.
3. Do you have at least 20 percent or more equity in your home? If so, you might benefit from refinancing by reducing or eliminating the Private Mortgage Insurance (PMI) that you are paying each month. PMI is a type of insurance that is required in many loans where the buyer didn't make a down payment. of 20% or more. In exchange for less money down, PMI provides additional insurance to lenders in the event of a default. But if you now owe 80% or less on your mortgage, you may be able to drop the PMI and that can reduce monthly payments by $70 to $150 or more.

1. Is your debt to income ratio nearing the maximum? If you refinance your home, you may actually improve your credit score by freeing up additional income and lowering the minimum monthly payment amounts of your basic bills. By keeping a solid credit score and low debt to income ratio, you will often qualify for lower interest rates on everything from credit cards to insurance… making this a strong strategic move toward lowering all of your bills at one time.
2. Do you need to pay for a large one-time out of pocket expense like major medical bills or college tuition? If so, it is often more affordable to take out money when you refinance your home rather than securing additional loans. Just keep in mind, you could be refinancing for up to 30 years so the total cost may be substantially more in the long run. Take time to calculate the cost versus savings for yourself before making a final decision.If you answered "yes" to any of the above questions then you might benefit from speaking to a mortgage broker or lender to refinance your home. It could easily save hundreds of dollars per month. Be sure to consider the refinance closing costs and any other refinance fees in your decision. If refinance costs are nearly equal to what you would save by refinancing, then it may not be worth the trouble.

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