How HARP 2.0 Works
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How HARP 2.0 Works

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
By , Trusted Mortgage Expert with 45+ Years of Experience
Edited by Michael Jensen

Please note that the HARP 2.0 Program is no longer available.  We recommend you review our summary of Refinance Assistance Programs for other mortgage refinance options.

The HARP 2.0 Program (Home Affordable Refinance Program) enables borrowers who are underwater on their mortgage to refinance.  If your mortgage is underwater, meaning your mortgage balance is greater than the value of your home, it can be virtually impossible to refinance without using a refinance assistance program.  The program is designed to make it easier for borrowers who are current on their mortgage to refinance into a more affordable loan with a lower monthly payment.  HARP 2.0 guidelines focus more on your ability  to make your new mortgage payment than your property value or how much equity you have in your home.

The main difference between a HARP 2.0 refinance and a standard mortgage refinance is that the HARP 2.0 Program does not apply a maximum loan-to-value (LTV) ratio, which means that you may be able to refinance even if you are significantly underwater on your mortgage. This also means that borrowers may not be required to obtain a property appraisal which enables more borrowers to refinance and saves them significant money and time. Additionally, HARP 2.0 does not require borrowers to verify their income or use a minimum credit score in most cases. The program's reduced borrower qualification requirements make it ideal for homeowners who cannot refinance using standard mortgage programs.

HARP 2.0 Key Considerations
  • No maximum loan-to-value (LTV) ratio makes HARP 2.0 Program ideal for underwater borrowers
  • Potentially no property appraisal report
  • No minimum credit score or income verification required in most cases
  • Saves borrowers money and time
  • No borrower income limits
  • Applies to investment properties
  • Strict program requirements limits eligibility for most borrowers
  • Borrowers must be current on mortgage
  • Loan limits
  • Program expires on December 31, 2018
How the HARP 2.0 Program Works

The first step with the HARP 2.0 program is to determine if your mortgage is eligible and you qualify for the program.  There are many HARP 2.0 eligibility requirements requirements that prevent most borrowers from using the program today.  We review program and borrower qualification requirements in detail below.

Borrowers who are eligible for the HARP 2.0 Program apply through approved lenders such as banks, mortgage banks, mortgage brokers and credit unions. These approved lenders make sure that your loan is eligible and that applicants meet program guidelines and qualify for the program. Even if your current lender offers the HARP 2.0 Program you are not obligated to work with that lender when you refinance and you should shop your mortgage business to find the loan with the best terms.

The table below shows interest rates and closing costs for refinance lenders in your area. We recommend that you contact multiple lenders to determine if they offer HARP 2.0 or other refinance assistance programs. Compare the loan terms and requirements for HARP 2.0 to other refinance programs to determine the option that best meets your needs.  Comparing lenders and proposals enables you to find the refinance program that is right for you.

Current Refinance Mortgage Rates in Ashburn, Virginia as of June 12, 2024
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Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes, insurance premiums or private mortgage insurance if applicable. Actual payments will be greater with taxes and insurance included. Read through our lender table disclaimer for more information on rates and product details.
HARP 2.0 Eligibility

We review the key HARP 2.0 eligibility guidelines below.  The first step for borrowers is to determine if their mortgage is eligible for the program.

Fannie Mae or Freddie Mac Must Own or Guarantee Your Loan

To be eligible for HARP 2.0, your mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that provide capital to and buy mortgages from lenders. Borrowers do not obtain mortgages directly from Fannie Mae or Freddie Mac but in many cases your mortgage is sold to them and you continue to make your payment to your original lender.  The majority of mortgages in the U.S. are owned or guaranteed by Fannie Mae and Freddie Mac.  So even if you make your monthly payment to Wells Fargo, Chase or Bank of America there is a good chance that your mortgage is actually owned or guaranteed by Fannie Mae or Freddie Mac.  You can use Fannie Mae and Freddie Mac's loan look-up tools to determine if they own or guarantee your loan.

Original Mortgage Closing Date

Your original mortgage must have closed on or before May 31, 2009.  So if your mortgage closed after May 31, 2009 you are  not eligible for HARP 2.0.

Loan Status

To qualify for the program borrowers must be current on their mortgage and not delinquent.

Payment History

Borrowers cannot have any missed or late mortgage payments within the six months prior to applying for the HARP 2.0 program and no more than one late payment in the past twelve months.

Repeat Usage of Program

Under most circumstances you cannot have previously refinanced your mortgage with HARP 2.0 so you cannot use the program multiple times.

Loan-to-Value (LTV) Ratio

The HARP 2.0 Program does not apply a maximum loan-to-value (LTV) ratio which makes it ideal for home owners who are underwater on their mortgage.  For example, if your home is valued at $100,000 and your mortgage balance is $110,000, your are underwater on your loan because your home is worth less than what you own on your mortgage.  It is usually impossible to refinance your mortgage if you are underwater on your home.  Because the program does not use a maximum LTV ratio, lenders may not require an appraisal report which saves borrowers money and time.  In cases where lenders can access a reliable property value estimate from Fannie Mae or Freddie Mac, called an Automated Valuation Model (AMV) value, a new appraisal should not be needed.  If a reliable property value is not available through Fannie Mae or Freddie Mac a new appraisal report is usually required.  

Please note that the no LTV ratio rule only applies if you refinance an owner-occupied property and use fixed rate mortgage. The maximum LTV ratio for non-owner occupied properties or if you refinance into an adjustable rate mortgage (ARM) is 105%.

Mortgage Program

Fixed rate mortgages and certain adjustable rate mortgages (ARMs) are eligible for the HARP 2.0 Program.  Borrowers cannot refinance into an interest only mortgage according to program guidelines.

Loan Limits

The program applies conforming loan limitswhich vary by county and the number of units in a property. The conforming loan limit in the contiguous United States for a single unit property is $726,200 in most counties. In Alaska, Hawaii, Guam and the U.S. Virgin Islands the loan limit is $1,089,300 for a single unit property.

Type of Refinance

The HARP 2.0 Program only permits rate and term refinances which means that the only terms of your mortgage that can change are your program, interest rate and loan length. In most cases borrowers lower their mortgage rate but keep their term the same with their new loan. Cash-out refinances are not allowed through the program.

Prepayment Penalty

Your original mortgage may have a prepayment penalty if you refinance with the program but your new mortgage should not have a prepayment penalty.

Property Eligibility

The program applies to both owner occupied and non-owner occupied one-to-four unit properties and single unit second or vacation homes.  Unlike most mortgage refinance assistance programs, investment properties are eligible for HARP 2.0.

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HARP 2.0 Qualification Requirements

We outline borrower qualification requirements for the program below.  Review this information to determine if you qualify for HARP 2.0.

Borrower Credit Score

HARP 2.0 guidelines do not apply a minimum borrower credit score making it ideal for borrowers who have experienced a drop in their score.  Please note that although program rules do not require a credit score some lenders may apply a minimum score to meet their internal underwriting requirements.  Borrowers who are rejected by one lender due to a low credit score should contact other lenders to determine if they qualify as underwriting guidelines vary by lender.

Borrower Debt-to-Income Ratio

Technically, the HARP 2.0 Program does not apply a maximum borrower debt-to-income ratio although in practice most lenders use a maximum borrower debt-to-income ratio of 45%, which is consistent with many standard mortgage programs.  The debt-to-income ratio represents the maximum percentage of your monthly gross income that you can spend on total monthly housing expense which includes your mortgage payment, property tax, homeowners insurance and other applicable housing expenses. The higher the debt-to-income ratio, the larger the mortgage you qualify for.

Please note that although HARP 2.0 does not require borrower income verification (unless your new mortgage payment increases more than 20%) or apply a maximum debt-to-income ratio, most lenders confirm that borrowers have the financial ability to repay their new loan. This is typically accomplished by confirming the borrower’s on-time payment history and applying guidelines similar to the Qualified Mortgage (QM) criteria to ensure that borrowers can repay their mortgage.

Borrower Income Limit

Unlike some other mortgage assistance programs, the program does not apply borrower income limits so borrowers cannot be disqualified from the program because they earn too much money.

Use the FREEandCLEAR Lender Directory to search for refinance assistance programs offered by top-rated lenders.


HARP 2.0 Costs and Fees

Mortgage Rate

In general, HARP 2.0 mortgage rates are higher than rates for regular refinances.  Rates vary by lender and other factors so borrowers should shop multiple HARP 2.0 lenders to find the loan with the lowest interest rate and fees.

Closing Costs

Borrowers are required to pay standard lender fees and closing costs.  Applicants should not be required to pay any extra fees to apply for the program. You should avoid lenders that charge extra costs, especially upfront fees, to access the program.

Private Mortgage Insurance (PMI)

According to HARP 2.0 guidelines, if your existing mortgage does not have private mortgage insurance (PMI), then you are not required to pay PMI on your new loan, regardless of your loan-to-value (LTV) ratio.  If your existing mortgage has PMI, you are required to have the same level of PMI on your new mortgage.  This rule applies to mortgages with both borrower-paid PMI and lender-paid PMI.  You can contact your current lender to determine if you pay PMI on your existing mortgage.  Additionally, if a lender declines you because you currently pay PMI you should contact other lenders about the program. 

HARP 2.0 Program End Date

HARP 2.0 expires on December 31, 2018.  Fannie Mae and Freddie Mac intend to replace the program with another high loan-to-value (LTV) ratio refinance assistance program but eligible borrowers should move quickly and apply for the program before it ends

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About the author
Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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