Refinancing Through the HARP Program

June 26, 2012 By Leave a Comment

HARP Refinance

If you owe more than your house is worth, and want to refinance to today’s low interest rates, you need to check out the HARP program. Millions of homeowners with underwater homes are finding relief in a new version of the Home Affordable Refinance Program (HARP). Refinancing to lower interest rates could slash your monthly mortgage payment or shorten the time it takes to pay-off your mortgage.

The new HARP loosened qualification rules, making it it easier for underwater homeowners to qualify for a refinance. When HARP 2.0 was released in November 2011 you had to work with your original lender. Since March 2012, when Fannie Mae and Freddie Mac rolled out the automated underwriting systems, you can work with any participating HARP lender. That means more competition for your business and better rates for you

HARP 2.0’s Hurdles

There are two series of hurdles you must clear before you can refinance your loan under HARP 2.0. The first set of hurdles concerns the loan itself. The three key eligibility questions are:

  1. Is the loan owned by Fannie Mae or Freddie Mac?
  2. If so, was the loan purchased by Fannie or Freddie on or before May 31, 2009?
  3. The loan was not refinanced under HARP before (some exceptions apply).

If you answer yes to these three questions, then your loan may be eligible for HARP.

Tip: If your loan is a FHA loan, then check out a FHA streamline refinance loan.

The second set of hurdles concerns your finances and property. Fannie Mae and Freddie Mac set up the basic guidelines. There are two basic ways your loan can be processed:

  1. Manual Underwriting System: Only your original lender (who is also your current servicer) can process a HARP loan through the manual underwriting system.
  2. Automated Underwriting System: Any participating lender can process a HARP loan through the automated system.

Keep in mind that lenders are free to have stricter qualifying rules than the basic Fannie and Freddie requirements.

When shopping for a HARP loan, here are some of the main points to look out for:

  • Credit Score Requirements: Fannie and Freddie have no minimum FICO score requirements. However, each lender has its own credit score requirements, so if you are denied by one lender, keep shopping.
  • Income Requirements: Your original lender can approve a loan with no debt to income ratio (DTI) requirement. However other lenders must qualify you based on your DTI. The rule-of-thumb for a HARP loan is a 45% maximum DTI.
  • Timely Mortgage Payments: The HARP program allows for no late mortgage payments in the last 6 months and one late (30 days) payment in the preceding 6 months. However, some lenders do not allow any late payments.
  • Investment Properties Qualify: You can refinance a second home or rental property under HARP 2.0.
  • Fees: Lenders are not consistent in the fees or the interest rates they charge for HARP 2.0 loans. Some lenders charge a few hundred dollars for HARP 2.0 loan fees, and others charge thousands. It pays to shop around, so you can compare interest rates and fees.
  • Condos: While HARP guidelines for condos are tricky, many more condo owners will qualify for a loan under HARP 2.0 than under the first version of HARP.

Applying for HARP
First, go to the Fannie Mae and Freddie Mac Web sites to learn if either owns your loan and whether they bought your loan on or before May 31, 2009. If so, you can contact either your current mortgage servicer or shop around with the many lenders who are offering the HARP 2.0 loan.

If your application is rejected, ask for the specific reason why. If you applied with your original lender, find out whether the lender used the manual or automated system. Request manual underwriting if your original lender turned you down based on automated underwriting, as it may result in your loan being approved.

It pays to shop for HARP 2.0 refinance. Many homeowners report one lender will reject their application, but another will offer them an attractive refinance. Second, lenders are not consistent in their offers. As mentioned, closing costs are all over the map. Interest rates vary, too.

Summary
HARP 2.0’s rules are technical. Each lender creates different overlays. If you believe you qualify for HARP 2.0, be persistent! The rules that are in place today could very well be expanded in the future. This is one instance in life where shopping can be the solution to your problem.

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Beat the Check

June 25, 2012 By 3 Comments
Wheel of fortune. Shot wide open using 50mm/f1...
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Have you ever played a game of “Beat the Check”? Your rent is due tomorrow, but you don’t get paid until Friday, so you write the check today an, on payday, you run to the bank to get your paycheck deposited before it has a chance to clear. To stretch out the time, you write yourself a check from another account to cover the deficit, knowing that will take a few more days to clear. This is called “floating” a check.

Sound familiar?

I think most people who write checks have tried to rush a deposit in before a check clears.

In 2004, the Check 21 act went into effect, which turned the game on its head. This law gave check recipients an option to make a digital copy of a check, slashing processing time. Instead of boxes of checks being transported around the country, the check began getting scanned and instantly transferred, along with all of the encoding necessary to keep the digital checks organized. This dramatically cut the amount of time it took to clear a check. What was once a week was reduced to as little as 48 hours.

Now, as technology improves and banks update their infrastructure to match, the “float” time has been reduced even further. Many banks are using image control systems to instantly convert all incoming checks to digital format. Within a couple of hours, these images can be transmitted to the Federal Reserve, to be transmitted nearly instantly to the issuing bank. If both the issuing and the receiving banks are using modern image control systems, it is impossible to float a check. “Beat the Check” is a thing of the past. It’s like betting on purple at the roulette wheel.

Of course, this doesn’t mean that the funds are instantly available. That would eliminate the banks being able make use of the funds during that time. Don’t expect the banks to make a habit of allowing you the use of your money before the federal regulations demand it.

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Can Bad Credit Cost You Your Job?

January 27, 2012 By 7 Comments

Did you know that having a bad credit history could cost you your job? An increasing number of American employers have turned to running credit checks to screen job

NEW YORK, NY - MARCH 03: Bill Harris of Brook...

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applicants. Some companies even evaluate existing employees on a regular basis by checking their credit reports. If you have outstanding debts, you might consider getting one of those credit cards for bad credit to clean up your report before you apply for your dream job.

Not all companies run your credit history when you apply for a position. However, if you’re applying for a job that entails working with money or valuables, it’s a safe bet that they’ll be checking your credit history. Financial institutions, brokerage companies and jewelry manufacturers all run credit checks, as do hotels, accounting firms, human resource departments and government agencies.

Companies run credit checks because they want to hire employees who won’t be tempted to embezzle company funds to pay off large debts. Some companies fear that employees who carry large debt loads are susceptible to blackmail or bribery. The federal government carries this concern even further, indicating that citizens who owe large debts are considered national security risks.

Many companies feel that your credit report gives them a sneak peak at your true character. Having a good credit history indicates that you are a responsible person with excellent character. Having a bad credit history means that you are an unreliable person of poor character. True or not and fairly or not, this is the current belief running throughout company hiring departments.

Unfortunately, you can’t relax about your credit report even after you’ve been hired for a position. Once you’ve given a company written permission to check your credit report, they can recheck it at a later date. Government and financial organizations often run periodic credit checks on all of their employees. Some companies only recheck your credit history if you are up for a promotion. It’s a good idea, therefore, to keep your credit history squeaky clean.

Keep in mind that having a couple of late payments probably won’t kill your chances of employment or promotion. Most employers look for the really big issues, such as high credit card balances, defaulted student loans, repossessions and foreclosures. Some companies also look for charge-offs and consistent late payments as well.

Steps You Can Take

Financial experts suggest checking your credit report before you start your job search. Read your credit report carefully and make sure that all of the information is accurate. If your report contains incorrect details or any unauthorized charges, dispute these errors immediately and have them corrected to raise your credit score.

If you have a host of unpaid bills, find a way to settle those debts to improve your credit history before applying for jobs. Many people turn to credit cards for bad credit consumers. These cards allow you to consolidate all of your debts into a single debt. Just don’t forget to make the payments on this card.

Be upfront with potential employers about any negative marks on your credit history. Just tell them that you have had past issues with your credit and are now working to clear up all of your debt. There’s no need to go into explicit detail.

Once you have a job, be sure that you check your credit report at least every six months to ensure it contains only correct information. Pay all of your creditors on time. Never take out any new lines of credit unless you are absolutely positive that you can pay it back in a timely manner.

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