What Are the Differences between a Typical Mortgage and a Harp Loan?

December 3, 2013

155562224Dean Graziosi states that the primary reason why homeowners choose to refinance their existing mortgages is to obtain a lower interest rate and reduce their monthly payments.  With the introduction of the new HARP financing program many homeowners are confused as to how it is different and what, if any benefits are associated with a HARP loan.  If you’re like the majority of homeowners you have more than likely heard of the HARP refinance program.  To help you better understand the differences between a traditional refinance and a HARP refinance we have put together some information that we hope will help you understand the differences.

When a homeowner chooses to refinance their existing loan using a traditional refinance method they have the option of choosing from two typical types of loan, states Mr. Graziosi.  The first is a standard loan that is designed to refinance the current balance a homeowner owes on their mortgage.  The second option is a “cash out” mortgage that is taken out in an amount that exceeds the existing mortgage.  In order for a homeowner to qualify for this type of loan, their finances must be in excellent shape and their home’s loan-to-value ratio must meet certain requirements set forth by lenders.

Because of the recent housing crisis many homes are valued at a price lower today than they were five years ago.  Because of this many homeowners may find themselves underwater on their loan, which means that they now owe more on their home than it is currently worth.  Because of this many lenders are not confident in approving loans to homeowners who are in this situation.  This may make obtaining a traditional refinance much more difficult for homeowners even if their current financial state is in excellent condition.

With so many homeowners currently underwater on their existing loans, the government developed the Home Affordable Refinance Program, also known as HARP.  Under this program many homeowners will find it much easier to qualify and refinance their homes even if they are underwater.  A HARP refinance differs from a traditional refinance in that many of the requirements have been lowered.  With a traditional refinance you often have to meet certain financial requirements and your home must be appraised, this process is very similar to what you had to go through to get approved for your existing mortgage explains Mr. Graziosi.

Dean Graziosi explains that with a HARP loan the process is more efficient and there is less paperwork required.  There is also no appraisal required to be approved for a HARP loan.  If you or someone you know is currently trying to refinance their existing mortgage but are underwater on their loan, you may want to consider a HARP loan.  They are designed to help homeowners who have lost value in their home still refinance and keep from losing their home altogether.

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