Lorie Jaynes

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The Home Affordable Refinance Program, or HARP, is a federal program to assist homeowners with refinancing their home loans to a lower interest rate. Homeowners who are underwater on their loan, or those with little equity, are encouraged to apply.

The HARP program is also known as the Obama Refinance Program, or Obama Mortgage, as it was put in place by President Barack Obama's administration.

If you are not behind on your payments, but cannot obtain refinancing through traditional means because your home is worth less or you are underwater, you may be eligible for a HARP refinance.

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HARP Eligibility

You must meet these basic eligibility requirements:

You are current on your home loan. This means you have not had any over-30-days-late payments in the last six months, and no more than one in the last 12 months.
Your home is your primary residence, a 1-unit second home, or a 1- to 4-unit investment property.
Your loan is owned by Fannie Mae.
Your loan originated on or before May 31, 2009.
Your current loan-to-value (LTV) ratio is more than 80 percent.

Benefits of a HARP Refinance

There are many benefits to the HARP program. Homeowners with a first AND second mortgage can qualify, as well as homeowners who are underwater on their loan. There is no maximum LTV ratio to qualify, and mortgage insurance is not required unless your loan already has private mortgage insurance.

Borrowers who have a large mortgage with an interest rate between 6 and 8 percent will have the most to gain from a HARP refinance.

HARP Closing Costs

You will need to pay closing costs when you do a HARP refinance, but you can roll these costs into your new mortgage. There are limits, however. Fannie Mae caps the closing costs at 4 percent of your existing balance.

If your closing costs are higher, you will need to pay the rest out of pocket.

How to Apply for a HARP Loan

You do not need to do a HARP refinance through the same lender who originated your original mortgage. In fact, not all mortgage servicers participate in the program, but most do. The cost of the refinance will vary by lender, so it pays to compare closing costs and rates to get the best deal.