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What Is HARP and Is It Right for You?

What is HARP?

If you’re reading this, chances are you’re one of the thousands of responsible homeowners who pay their mortgage on time every month but are still “upside down.” That is, you still owe more than your home is worth. And you’ve heard about people refinancing their homes to save money, but your bank says you’re not in a position to refinance your home. It’s a story we’ve heard time and again since the housing market tanked in 2007 and 2008.

To help homeowners like you, the Federal Housing Finance Agency (FHFA) established a program so you can take advantage of historically low interest rates and save hundreds (or even thousands) of dollars a year on your mortgage—all while not being required to pay extra to the bank. The Home Affordable Refinance Program, or HARP, is one of the few financial bailout programs Dave Ramsey says actually works.

To understand why HARP is a great option for certain homeowners, we’ll walk you through a closer look at what HARP is, who qualifies to take advantage of it, and what the benefits of this program are.

Why would I consider refinancing with HARP?

Let’s say when you bought your house it was worth $200,000. You put $20,000 down and began paying your monthly payment on a $180,000 mortgage at around a 6% interest rate. That was a good rate in those days, but then the Great Recession came along and home prices tanked.

Suddenly, your $200,000 house that you owe $180,000 on is worth $130,000. Through no fault of your own, you’re now “upside down” on your mortgage. Mortgage lenders also call this situation “underwater.” Nothing you did put you there, but it happened.

Now your bank is offering an even lower interest rate on your mortgage at 4%. Your monthly payment would go down significantly, and you’d be able to pay off your mortgage much faster! But the bank won’t let you refinance to that lower rate unless you make up the difference between what your home is worth today and how much you currently owe—and that’s more than $50,000 in our example above.

This is where HARP comes in. Qualified homeowners can refinance their homes to take advantage of the historically low interest rates without having to make up the difference between what their home is worth today and how much they’re upside down. So, homeowners who are underwater on their mortgages but otherwise making their payments on time can save tens of thousands of dollars over the life of their mortgage!

Other ways HARP can save you money

Lowering your interest rate isn’t the only way refinancing through HARP can save you money. The program also has other benefits built in to help you save money when it comes time to close on the new loan:

Bypass a new appraisal

Traditional refinancing requires homeowners to pay hundreds of dollars for a new appraisal, but some HARP mortgage lenders allow homeowners to bypass the appraisal process and use an automated home value system instead. Your lender will be able to tell you more about this when the time comes.

Move from adjustable to fixed rates

If you currently have an adjustable-rate mortgage (ARM), you can take advantage of HARP to get a fixed-rate mortgage. Because an ARM payment can quickly become too much for homeowners to afford, moving to a consistent and lower payment through HARP could lower your overall mortgage amount.

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Who is eligible for HARP?

Qualifications for refinancing with HARP can vary greatly depending on your mortgage provider. However, the federal guidelines for eligibility are pretty straightforward:

  • You’re current on your mortgage—no late payments over 30 days in the last six months and no more than one in the past 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 Freddie Mac or Fannie Mae
  • Your loan was originated on or before May 31, 2009
  • Your current loan-to-value (LTV) ratio must be greater than 80%

Calculating your LTV ratio is easier than it sounds! Just take the current amount you owe on your mortgage and divide that by the value of your home:

Total Owed on Home: $180,000
Current Value of Home: $130,000
LTV Ratio: 138%


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Pay off your home faster by refinancing with a new low rate!

Thankfully, HARP doesn’t set an upper limit on the LTV ratio. So, as long as you meet the criteria listed above, you can take advantage of the program no matter how much you owe on your home.


Both Freddie Mac and Fannie Mae require any HARP loans to provide at least one of these benefits:

  • A more stable mortgage (like moving away from an adjustable-rate mortgage)
  • A lower interest rate
  • A shorter term loan
  • A reduced monthly principal and interest payment

If you’re familiar with Dave Ramsey’s philosophy, you know that simply reducing your monthly payment isn’t a good enough reason to refinance. But HARP offers many benefits beyond just lowering your monthly note that could help underwater homeowners get back on top.

How to start the HARP process

If you think you can benefit from HARP, there are a few steps you have to take to get ready. First, contact a trusted lender who has the knowledge and experience to walk you through this process. We recommend Churchill Mortgage. They’ll work with you to determine if your loan is owned by Freddie Mac or Fannie Mae and make sure it’s old enough to qualify for HARP. Remember, only loans originated before May 31, 2009, qualify.

Once you have your refinancing lender, they’ll ask you for two kinds of documents: your mortgage statements and income verification. In most cases, you’ll just need to show either pay stubs or income tax documents (such as your W2) to confirm your income.

And if you’re currently paying private mortgage insurance (PMI), your new, HARP-backed mortgage will also have to carry the same insurance—which can mean less savings in the refinancing process.

But now that you know the benefits HARP can bring to your monthly budget, you can finally get your mortgage back under control. Just don’t waste much time! HARP is set to expire December 31, 2018.

If you think you could benefit from HARP, get in touch with the helpful experts at Churchill Mortgage who can determine your eligibility and guide you through the refinancing process.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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