HARP 2 Mortgages Owner Occupied
by Shashi from Clearfield, UT
Are HARP 2 mortgages only for owner occupied homes? Hi Kate, Can we use HARP to refinance our rental house? We had purchased a home in Salt Lake County in 2006. We have second mortgage. Its value has dropped since. Then I had to move out of state for a job. We rented the house. We moved back to Utah in early 2011.
We could not move in the house since it was rented. We rented an apartment close to my current work. Both leases (the apartment lease where we are staying now and the renter's lease on the home we own) are going to end next month.
But now we want to refinance the house. I read the HARP 2 refinancing eligibility rules. My understanding is as follows:
1. We must occupy the home we own to refinance (correct? Yes No)
2. We must not have late delinquent payment in last 12 months (we didn't)
3. We do not have to appraise the house (Correct? Yes No)
4. Distance between the my current work location and the home we own is more than 50 miles, difficult for commuting every day especially in winter. If we decide to re-rent the house we own and re-rent the apartment we are in now, can we refinance under HARP?
5. How does 125% LTV rule apply? The amount we owe on the first mortgage is less than 125% of current estimated value of the home.
6. Shall we pay origination fee of $2200 with 4.5% APR 30 years or take 4.625% rate and avoid origination fee?
Please let me know soon. Thanks.
Kate Answers: Are HARP 2 Mortgages Only for Owner Occupied Homes
I'll get straight to answering your questions using the new HARP 2.0 guidelines.
I've repeated an abbreviated form of your question, followed by my answer.
1. Occupancy Guidelines Shashi:
We must occupy the home to refinance, correct?Kate:
Owner-occupied, vacation homes, and rental properties can be refinanced with HARP now. But vacation homes require reserve savings equal to 2 months' house payments and investment properties need 6 months. See Property Guidelines
2. Monthly House Payment History Shashi:
No late mortgage payments in the last 12 months, right?Kate:
No more than one 30-day late monthly house payment in the last 12 months and none in the last 6 months. See Credit Guidelines
3. Real Estate Appraisals Shashi:
We need an appraisal, correct?Kate:
It depends on whether Fannie Mae or Freddie Mac's automated underwriting software triggers an appraisal waiver. See my answer to "Searching" under this subheading: Will you need a full appraisal on your home?
4. Rental Properties Shashi:
If we re-rent the house, can we refinance with HARP?Kate:
Rental properties, also called investment properties, are now eligible to be refinanced under HARP 2.0. (See note on increased reserves above.)
5. Loan-to-Value Shashi:
How does the 125% LTV rule apply?Kate:
Loan-to-value (LTV) restriction was removed under HARP 2.0 as long as you are refinancing into a fixed rate with a term no greater than 30 years. Your 2nd mortgage lender is required to sign an approved subordination agreement and subordinate their position to your new 1st mortgage.
6. HARP Mortgage Refinancing Costs Shashi:
Shall we pay an origination fee of $2200 with 4.5% or take 4.625% and avoid the fee?Kate:
How long do you plan to keep the mortgage? Go to the subheading Mortgage Refi Question 3 - Break Even
for help calculating your break even point.
Then see Understanding Good Faith Estimates
to reduce mortgage fees
Fly in the Ointment - Lender Overlays
Unfortunately, you could find that lenders are still adding restrictions known as "overlays" to Fannie and Freddie guidelines. For this reason, it's even more important than ever to choose the best lender for your situation. See Why HARP 2 Mortgage Lenders are Inconsistent
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