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Charlie Glahe WIN Broomfield

One option for homeowners struggling with finances

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In 2016, the average mortgage rate remained lower than it had been in previous years. This spurred many homeowners to refinance their home loans in search of a better deal. However, some may find that their home values dropped considerably. Even if a home inspection turns up no faults, it can still be possible to earn a failing grade on a home appraisal. This can end up costing several thousands of dollars that many haven't planned for.

Since the housing crisis began in 2008, millions of homeowners around the U.S. have found themselves in this situation. As the price of homes in general fell, homeowners had to make up the difference with higher mortgage payments. Once these owners became "underwater" on their mortgage, they were forced to either continue paying higher interest rates or face foreclosure. Unfortunately, many had to take the latter option. According to CNN, around 3 million Americans faced at least one foreclosure in 2009, a record number.

While the number of foreclosed homes has fallen significantly since then, there are still many families or homeowners whose mortgage payments are too high. Fortunately, there are programs available that can ease the burden for qualified owners.

One of these programs is the Home Affordable Refinance Program. This is an initiative set up by the federal government in 2009 to stem the tide of homeowners facing foreclosure or on the brink of it. Using HARP, owners who qualify can save thousands per year on their mortgage payments, allowing them to get back on their feet and pay off remaining debt. According to its official website, HARP has helped 3.4 million Americans achieve this goal.

HARP requirements
A recent study from leading real estate economists found that HARP helped the average homeowner save around $3,500 annually. However, the study also discovered that the program did not assist as many people as it could have. The experts concluded that more needed to be done to spread the word about HARP so that homeowners who fall behind on mortgage payments know that there are options other than bankruptcy or foreclosure.

First, homeowners need to know if they meet the requirements of HARP:

  • Mortgages eligible for financial assistance under the program must have been used to buy a home before May 31, 2009. 
  • The mortgage must be owned by Fannie Mae or Freddie Mac. Fannie and Freddie are two of the largest home loan servicing organizations in the country. Many homeowners may not realize that their loan is actually owned by Fannie or Freddie. To be sure, mortgage owners can ask their lender.
  • Before applying for HARP, owners must ensure they are current on their monthly payments at the time of the refinance. There can be no late payments in the last six months. Owners must also ensure they did not make more than one late payment in the last 12 months.
  • Finally, the mortgage in question cannot be worth less than 80 percent of the home's appraised value. For example, a home valued at $200,000 would be eligible if the mortgage has more than $160,000 in outstanding payments.

If a homeowner meets all these requirements, he or she will likely be able to save on their mortgage. Otherwise, there are still a wide variety of home financing options available. Primarily, though, homeowners should concentrate on staying current on mortgage payments and saving up enough for uncertain times. This may be the best strategy for long-term saving on a home loan.