Mortgage  Question?
Am I Getting Ripped Off On HARP Refinance?

I am applying for a HARP mortgage refinance and the lender says I need to pay discount points because my loan amount is less than $100,000. Then the appraisal came in higher than expected and the lender wants to charge me even more points. I am looking for a 20 year mortgage and the lender is quoting me a 4.300% rate. Am I getting ripped off?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Your question raises multiple red flags and I recommend that you contact other lenders to determine how they would handle your situation.

First, I am unaware of a minimum loan amount for the HARP Program. The lender may impose a minimum loan amount but that is not a government program guideline. Additionally, there are no HARP Program rules that require borrowers to pay discount points due to a low loan amount. Again, the lender may request that you pay discount points but that is not required under the HARP Program and it is 100% up to the borrower to decide if she or he wants to pay discount points. Lenders cannot require that borrowers pay discount points.

Second, as a rule of thumb, a half discount point should reduce your mortgage rate by ~.125% while a full discount point should reduce your mortgage rate by ~.250%. Be the number of discount points you are paying reduces your mortgage rate by the right amount. Additionally, you should not be required to pay more discount points because your appraised property value was higher than expected. We provide a comprehensive discussion of Should You Pay Discount Points on FREEandCLEAR for you to review.

Third, the mortgage rate you are being quoted for a 20 year loan seems high. You may have a lower credit score which typically means you pay a higher mortgage rate but in general, the mortgage rate you were quoted is higher than expected based on current interest rates. You can compare mortgage rates for lenders in your area by clicking INTEREST RATES

Finally, if your appraisal report came in higher than expected that is good for both you and the lender but your closing costs, including discount points, should not increase due to a higher appraised property value. In fact, the HARP Program does not actually require an appraisal report although some lenders do require one to meet their internal requirements.

There could be plausible explanations that address the issues outlined above but my sense is that your lender is not treating you fairly. Additionally, based on your loan amount and higher-than-expected appraised property value, you many not need the HARP Program to refinance your mortgage.

My recommendation is that you contact other lenders to to see if they offer better loan terms. You can review lenders in your area by clicking INTEREST RATES We advise you to contact four lenders as shopping lenders is the best way to save money on your mortgage. You can also use our Free Personalized Mortgage Quote function to receive no obligation mortgage quotes from up to four lenders. Like everything on FREEandCLEAR, these features are free to use and help you find the mortgage that is right for you.

There are a couple of points to keep in mind if you are considering changing lenders. First, you can cancel your refinance and work with a different lender any time before you sign your closing loan documents.

Second, your appraisal report is transferable to a new lender. If you decide to switch lenders you should send the appraisal report to your new lender so that their underwriting staff can confirm that they will accept the appraisal. Because the appraisal report was ordered by, and issued in the name of, your original lender, the appraiser will likely be required to re-issue the report in the name of your new lender. Most appraisers charge a reduced fee ($100 - $200) to re-issue an appraisal report in the name of a new lender.

Finally, if you are considering changing lenders make sure that the new lender can process your mortgage fast enough to meet your closing timetable. You do not want to delay refinance process because you switched lenders although switching lenders to lower your mortgage rate and closing costs can save you thousands of dollars in the long run.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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