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How to Refinance Your Mortgage

Juliette Fairley

NEW YORK (MainStreet)—When the real estate bubble burst five years ago, the Federal Government intervened and created the Home Affordable Refinance Program (HARP). Through direct lenders, HARP has successfully helped many homeowners refinance out of high risk, sub-prime and adjustable rate loans into low fixed rate mortgages. With the recent extension of HARP through 2015, the government expects millions more will benefit from the program.

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"To pre-qualify for HARP there are two critical requirements of a homeowner and their loan," said George Adair, area manager for Bay Equity Home Loans. "First, your current mortgage must be owned by Fannie Mae or Freddie Mac. Secondly, Fannie or Freddie must have purchased the loan prior to June 1, 2009."

Despite the expanded eligibility guidelines offered by HARP, certain banks and mortgage lenders are reluctant to offer the program to its fullest extent.

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As a result, many homeowners who met HARP guidelines were turned down by their bank and denied the benefits of the program. This trend has left homeowners no choice but to look elsewhere to refinance their mortgage. "While most banks and lenders refuse to help homeowners who are significantly underwater, we reached out to them and expanded our program," said Tim Carroll, sales manager at Bay Equity Home Loans in Santa Rosa, Calif. Below are six tips to consider when looking outside of HARP to refinance a mortgage:

--Written by Juliette Fairley for MainStreet

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  • 1. Shop around. The job of the consumer is to find the best APR and the lowest fees. "They vary the most in the mortgage financing industry," said Steve Nakash, national retail manager with Nationwide Direct Mortgage.
  • 2. Maximize your time. Mortgage brokers can check five or six banks to obtain the best rates of the day. "Bigger banks like Bank of America only have access to their own bank rates," said Tim Lucas, a former loan officer and editor of mymortgageinsider.com.
  • 3. Protect your credit report. Narrow your choices down to three lenders before having your credit report pulled by any one of them. "If you get your credit report pulled too many times, it affects your credit score," Nakash said. "If you are not doing business with a particular bank, don't allow them to pull your credit
  • 4. Determine your mortgage options. "Credit unions are good for short term fixed rate mortgages at 10 or 15 years, but for a mortgage more than a million dollars, consider a private bank especially for a 10-year or 7-year ARM because the private banking departments of big banks have competitive rates for larger mortgages," said Michael Moskowitz, president of Equity Now, a direct mortgage lender.
  • 5. Seek continuity. When refinancing with an online lender, request to be handled by only one account representative to avoid being passed around from one rep to another. "Most online lenders will accommodate that," said Nakash who services eight states online including California, Colorado and Washington.
  • 6. Pay attention. When loan-to-value is more than 80%, secure mortgage insurance. "If you have a $375,000 loan, 80% would be $300,000," Moskowitz said. "Mortgages of more than 80% must include insurance, according to Fannie Mae, Freddie Mac, and FHA requirements."

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