HARP Interest Rates and Guidelines

by Deloris in Conyers, GA, by Jena in Monticello, MN, by Cindy in Georgia

Determining HARP interest rates and understanding guidelines: Cindy wants to know who sets refinance rates for the HARP program. Deloris is told refinancing with HARP is going in the wrong direction but thinks it's fishy advice. Cindy's loan was ready to close but received a verbal denial. Her lender cannot explain why and told her to call Fannie Mae. It's time for answers!


Question 1: Interest Rates on HARP Loans

By Deloris from Conyers, GA

Hi Kate, We are currently upside down on our mortgage with Wells Fargo which is a fixed 6.5% interest-only loan, to expire next year. We applied for the HARP loan with Wells Fargo who told us that the interest rate was set by HARP and the best interest rate we could get was 4.5% on a $143,000 original loan.

The current market value of our home is about $110,000. We have A-1 credit (medium FICA score 800) and have never been late on our mortgage. This is a rental property that we purchased in 2006.

My question is: Is that the best interest rate we can get and did HARP actually set the rate?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Interest Rates on HARP Loans

Hi Deloris,

While Making Home Affordable is an official program of the US Treasury Department in conjunction with HUD (Housing and Urban Development), individual lenders set HARP interest rates.

Including Wells Fargo.

Let me say it another way. There is no government-sponsored interest rate for the HARP program.

None. Zip. Zilch.

But you are far from the only one who has asked me this, Deloris. For example, Cassie asks about interest rates for the HARP program at HARP Interest Rates and Closing Costs and Lynette at HARP Refinance Rates.

Taking it one step further, if a lender claims that HARP sets the interest rates, I'd question either their level of understanding or their business ethics.

HARP Loans for Rental Property

When Making Home Affordable Refinances began several years ago, HARP was restricted to owner-occupied properties. Since then, it has expanded to include investment houses.

Mortgage interest rates for non-owner-occupied are higher than owner-occupied loans. That's because investment properties pose more risk to banks considering the lack of emotional attachment that helps in keeping properties from foreclosure.

So you can expect your interest rate to be at least .5% higher. Maybe as much as 1%. This can be offset by buying down the rate, also known as points or prepaid interest. The downside being increased mortgage refinancing cost.

To compare, ask your mortgage originator what rate you'd get if you lived in the home. Then ask some friends if they've recently had a successful experience refinancing with HARP. Contact their specific originator for comparison shopping.

Best wishes for your rental home refinance,

Ask Kate

Question 2: HARP vs. Wells Fargo 3 Step

By Jena from Monticello, MN

Kate, I qualify for a HARP refinance. I called Wells Fargo mortgage consultant and he claims the Well Fargo 3 Step Plan is much better.

He can get me at 4% with no additional costs. I save $117. I kept asking, What about HARP? and he kept saying, It's not the right direction, you will get additional fees tacked on and won't have as much savings.

I think it's fishy.

Should I shop around to other banks? Where do I even begin?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: HARP vs. Wells Fargo 3 Step

Hi Jena,

The Wells Fargo 3 Step is a streamline in-house refinance plan even though, to me, it sounds more like country line dancing.

Well's representative should give you a solid comparison of the two programs and point to specific benefits of Wells Fargo 3 Step. Additionally, he should be able to describe in simple terms why the HARP program is not going in the right direction for you.

I once was asked by a home buyer if I preferred one loan program to another because it paid me better. I liked that! He was thinking!

A conscientious mortgage professional welcomes such questions and can easily address the concerns. But if your gut tells you something is fishy, well... there just might be.

See Betsy's experience at Buyer Beware of Mortgage Refinancing at No Cost for more help in developing a gut instinct.

Then go here for 3 ways to compare mortgage lenders and interest rates.

Good luck and very best wishes,

Ask Kate

Question 3: Not Qualifying for Refinancing

By Cindy from Georgia

Kate, I recently applied for and was qualified for a HARP refinance for 15 years. Everything appeared to be approved.

I thought everything was settled but the final paperwork. I made the call to the lender and after a few questions he said that I didn't qualify through Fannie Mae.

He could not tell me why or who to contact at Fannie Mae. My credit score is good. I haven't been late on any payments and wanted to refinance to lower my interest rate or payments.

Who can I contact at Fannie Mae to find out why I didn't qualify?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Not Qualifying for Refinancing

Hi Cindy,

Sadly, many large lenders have hired application-takers, passing them off to homeowners as mortgage professionals, to cash in on the glut of HARP loan applications.

Last week they flipped burgers but this week are handling your HARP application, with little to no training.

You can call Fannie Mae but I doubt they can help you. To date, they have not seen your individual loan application. Neither did they directly deny your mortgage. The lender did (and verbally at that) based on Fannie Mae HARP guidelines.

But go ahead and call anyway - (800)7Fannie - because I could be wrong. (I've seen stranger things the last couple of years.) Anyway, what can a phone call hurt?

Still, the lender owes you answers. Call the mortgage company back and ask for a supervisor. Tell them exactly what their representative told you. They must put your denial in writing. It's the law.

Read this before you call, How to Cure Mortgage Approval Hiccups, to get to the bottom of this nonsense.

Best wishes in getting your HARP loan approval,

Ask Kate

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Refinance after Bankruptcy
by: Underwater Homeowner

Is it possible to refinance an underwater mortgage that we are 2 months short on while we went through a chapter 7 bankruptcy last year.

We do not qualify for any type of mortgage loan modifications.

Hi, Kate here. HARP has no set guideline for a waiting period after a bankruptcy or mortgage foreclosure.

Regarding late mortgage payments on your home, one late mortgage payment during the previous twelve months is allowed, as long as there are none during the immediate six months before your HARP application.

See more details at HARP 2 Loan Description.

Keep in mind, lenders can add their own requirements on top of HARP guidelines. So if one lender says no, check with others.

If you haven't recently applied for a HAMP modification with your loan servicer, check here for the new Tier 2 Making Home Affordable Mortgage Modification guidelines.

Best Wishes, Kate

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You can also ask Kate about your mortgage at How to Find Your Mortgage Lender.

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