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Underwater? How HARP can help

Jun 22, 2012, 8:01 a.m.

With the economic calamities our country's experienced lately, it's no surprise that many people have found themselves underwater in their home loans. Without the helpful hand of mortgage aid programs, you may find it a near impossible feat to get a loan to refinance. To help Americans stay afloat and prevent even more foreclosures, the U.S. government has revamped the Home Affordable Refinance Plan, HARP. Here are the basics of how HARP works and how it might just help you out from under your sinking home.

Up to 125 percent loan to value. Traditional refinance loans used to only lend up to 80 percent of a home's value before requiring mortgage insurance. But because so many homes have decreased in value, the HARP plan allows refinance loans that are as high as 125 percent of your home's value.

No mortgage insurance. As long as you don't currently have mortgage insurance, your new loan will be free from mortgage insurance too -- even if the loan is for more than 80 percent of your home's value.

Appraisal waiver. Home appraisals are expensive and time consuming, but fortunately HARP allows for an appraisal waiver under most situations. Not only does this save you money, but it also means you can close on your refinance sooner.

Reduced documentation. Under traditional loans, you're required to provide at least six months of pay stubs or two years of tax returns to qualify. HARP only requires two pay stubs or one year of tax returns for self-employed homeowners.

No minimum credit score. A traditional refinance requires a minimum credit score of 680 and higher, but HARP only requires that your mortgage payments have been consistent for the last six months.

The only catch to qualifying for getting a loan through the HARP refinance program is that your home's mortgage has to be currently backed by Fannie Mae or Freddie Mac. To find out if that's the case, just go to the Fannie Mae and Freddie Mac websites and enter your address. If you're there, you may just be able to take advantage of one of the most effective mortgage aid programs in recent history.

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