Since then, there has been much effort within the mortgage industry to restructure itself why following stricter guidelines.  This recovery effort includes mortgage lenders and servicers, as well as private mortgage insurers—all seeking to help find ways to increase the number of homeowners who might be able to refinance their mortgage to more affordable interest rates. The Obama Administration’s Home Affordable Refinance Program (HARP) is one such program that is designed to assist homeowners in refinancing their mortgages—even if the mortgage is more than the home’s current value.

Now, the HARP program is in its second stage, and is commonly referred to as Harp 2.0.  Despite the benefits offered in this government program, many homeowners have still not taken advantage of the ability to possibly refinance on much better terms than those they currently have in their mortgage.  In order to qualify, borrowers must meet the following guidelines:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

When Freddie Mac and Fannie Mae were seized by the government, the housing market was seized by a downturned economy, even though these two events were not necessarily the result of the other.  But right before this happened, Freddie Mac and Fannie Mae were the primary mortgage lenders in the nation.

The problem associated with jumbo loans has been several years in the making.  First, before 2008, when Freddie Mac and Fannie Mae were the primary lenders, their limits were set at a $417,000 conforming mortgage loan limit. This meant that if you wanted a loan for more, you’d have to go to smaller banks to get it because Freddie and Fannie were put under budget limits by their government funding.

Then, after the global economic downturn in 2008 and the fears of economic collapse shortly followed, no one was lending anything that wasn’t government backed, so Freddie Mac and Fannie Mae were the potential homeowners’ only choices.

After the government seized both lenders, it recognized the need to remove these caps because of the enormous disparity in home prices throughout the country.  The limits were stalling the mortgage markets in some cities, such as San Francisco, where home prices were typically well over the $417,000 limit.  It attempted to make changes by increasing the limit, but these changes only took effect in some of the most obvious cities. This left other consumers without many options if they happened to live elsewhere and wanted maybe a bigger home, or more land.

Now that Main Street banks are more comfortable with lending, and the economy is on a slow but steady upswing, you will find that there are more small-town banks willing to take on jumbo loans and are offering great rates to prove it.

In order to qualify, you must meet the following requirements:

• Be a homeowner within one of the 50 states.
•  Show that you have made at least 6 payments on your FHA mortgage.
• Show that you have not made a late payment on your FHA mortgage for the past 12 months.
• Have a purpose for requesting the refinance, such as “to lower interest rates”.

That’s it – simple, fast, and in light of the current lowered interest rates, a smart financial move.

The best part is there isn’t even an appraisal needed, which is a plus for homeowners who have found themselves underwater in the current real estate market. According to the FHA Streamline Refinance requirements, homes that are underwater over 400% are still refinanced.  This is great news for homeowners in some of the hardest-hit cities, where home prices have dropped the most – cities like Tucson, Arizona; Palm Bay-Melbourne-Titusville, Florida; Jacksonville, Florida; Lakeland-Winter Haven, Florida; and Atlanta, Georgia.

So if you have an FHA Mortgage and meet the above criteria, it has never been easier to qualify for a refinance under the lowered interest rates.  The FHA is hoping this puts some of the strain off of the real estate market in both the short term and long term.

In the wake of the economic downturn and the foreclosure crisis, the regulations have shifted toward tougher restrictions on credit and income.  What this means is that your credit score is more important than ever in making sure that: a) you qualify for the mortgage and, b) you get to take advantage of the low interest rates that make buying a good idea in the first place.

If your credit score is 720 or above, and you are able to put down a large down payment, you’re in luck.  This is the optimal situation that mortgage lenders are looking for and gives your lenders the confidence they need that you will be able to make the payments on your home.  However, if your credit score is 719 or below, you might run into problems – even if you have paid all of your bills on time.

So does that mean that you can’t get a mortgage if your score is lower?  Not necessarily.  Some banks allow lower FICO scores to pass under certain circumstances – particularly if a significant down payment can be applied to the loan – but the banks who are allowing this are becoming fewer and far between.  Credit scores between 620 and 719 might qualify, with higher interest rates, but anything below a 620 will likely not.

There are several types of mortgages and each client’s best intesrest are served by a knowledgeable mortgage banker who is familiar with all of them. In general there are conventional loans, government loans which inclufe FHA, VA, and Reverse Mortgages and jumbo loans.

Client’s down payment options and credit scores will often dictate which loan suits the best. VA loans allow zero down payment on a purchase where as FHA loans require a 3.5% minimum down payment. Conventional loans start with 5% down payment. Rates are comparable amongst most loan types except Jumbo and Reverse.

Refinancing is likely not going to affect your credit score significantly unless it is “cash out refinancing”, which will increase your debt and reflect negatively on your credit.  Creditors see higher debt as a risk and will be less likely to look favorably on it.

There are other situations connected with your refinance that might have slighter impact on your credit score, although the impact will likely not be very significant (5-10 points, at most). One of these is if your old mortgage account is an account that has been on your credit report for a long time. You will lose the benefit of having an established account history with it.  Established accounts are an asset to your credit score. This means your credit score could be affected slightly. If your prior mortgage has been on your credit report for 10 years or more, that account would become inactive once you refinance. This could shave a few points from your credit score, so it is something to keep in mind.

However, in today’s market, with interest rates being as low as they are, if you can refinance – particularly if you are an FHA homeowner – it’s a good time to do it, even if your credit score takes a slight hit in the process.