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.



Shashi continues... 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

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Dear Shashi,

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.

Best wishes and feel free to leave a comment by following the link near the end of the page,

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Need HARP Refinance a Second Time
by: Colorado Homeowner

Kate, I have an investment property that was purchased at the height of the bubble and at a great loss to us, we still have it. We used the HARP in June 2010 reducing our rate to 5.6%. Close to 75% of the surrounding units went into foreclosure or were sold as short sales.

So now rents can be a quarter of what ours must be to break even - and we get zero help from BOA - the lender.

Since we have already used the HARP program once (didn't know that was my one shot), we seem to have no options. Even HAMP Tier 2 restricts me because of the 2010 refi. Can you think of any, or are all doors shut. Backed into a corner for "holding on"! Thank you -- j

Hi, Kate here.

Unfortunately, homeowners are limited to one HARP refinance per property.

Options would be a HAMP modification which now includes non-owner-occupied properties.

There's also Making Home Affordable Foreclosure Alternatives (HAFA) which include short sale and a couple of other options.

The bad news is that HAFA and HAMP go through your current lender. But the good news is that BOA is a participant. I wish you the best.

Good luck, Kate

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