The Home Affordable Refinance Program (HARP) was first announced in March 2009. It’s a federal refinance program that aims to target underwater homeowners. HARP is for those who are dealing with their mortgage payments but haven’t been able to refinance. They might have limited, no, or negative equity in their homes.

A HARP loan is similar to any other mortgage. Its underwriting process resembles any other conventional mortgage. Since Fannie Mae and Freddie Mac back this one, signing a loan disclosure and remitting financial documentation is necessary.

You need to have solid income sources, quality credit scores, and good assets. Aside from these qualifications, here are the HARP requirements:

• Freddie Mac or Fannie Mae must own or guarantee the mortgage
• On or before May 31, 2009, the mortgage must have been sold to Fannie Mae or Freddie Mac
• Borrowers should be current on their payments and have no payments more than 30 days late in the past six months
• Borrowers must also have no more than one late mortgage payment in the last 12 months
• Eligible property types include one-unit second home, primary residence, and one-to-four-unit rental property
• The current loan-to-value (LTV) ratio should be at least 80%.
• Borrowers must have no previously refinanced loan under HARP between March and May 2009.

Now, if you find that you qualify for HARP, then you need to start preparing your finances. Below are the ways to prepare for a HARP refinance:

1. Ensure Fannie or Freddie backs your mortgage
Both Fannie Mae and Freddie Mac have a loan lookup tool. You can use it to search for their loan:
Note that Fannie Mae or Freddie Mac doesn’t back mortgages that aren’t listed on either website. That means they aren’t HARP-eligible too.

2. Determine if your mortgage is old enough
Those mortgages that were securitized before to June 1, 2009, can apply for HARP. That means that your mortgage must have started in mid-May 2009 or earlier. Find your mortgage starting date by looking at your closing documents.Take note that since it may take up to 60 days to securitize a Fannie Mae or Freddie Mac loan, your loan might still be ineligible even if the start date is close to June 1, 2009.

3. Does your mortgage have mortgage insurance?
HARP is primarily designed to help homeowners with or without lender-paid mortgage insurance (LPMI) or private mortgage insurance (PMI). So if you have mortgage insurance, your new HARP mortgage should have the same level of coverage.Note that some borrowers have been denied a HARP refinance because of LPMI. So if your current lender won’t refinance because of LPMI, you need to shop around for another one that will.

4. You must be current
You should have made your last six mortgage payments on time. HARP requires this factor to all homeowners, and this information is verified against your credit report. So make sure to look into your credit report before submitting your HARP application.

5. Organize your HARP paperwork

For the underwriting process, you need to prepare the following:

• bank statements
• driver’s license
• homeowners insurance information
• pay stubs
• W-2s

For self-employed loan applicants, you need to provide a few years of tax returns, which are necessary to verify your income.

The HARP program has evolved over the past year, allowing more borrowers to qualify. But still, there are various reasons why one wouldn’t qualify for HARP such as:

1. Bad credit
Having too many late payments on your existing mortgage is a no-no.

2. Equity issues
HARP has the following requirements:
a maximum LTV ratio of 105% for borrowers who get a new adjustable-rate mortgage
no maximum LTV ratio for a lender who gets a new fixed-rate mortgage.
minimum LTV ratio of 80% for all loan types

3. Does your mortgage have mortgage insurance?
HARP is primarily designed to help homeowners with or without lender-paid mortgage insurance (LPMI) or private mortgage insurance (PMI). So if you have mortgage insurance, your new HARP mortgage should have the same level of coverage.Note that some borrowers have been denied a HARP refinance because of LPMI. So if your current lender won’t refinance because of LPMI, you need to shop around for another one that will.

4. No re-HARPs
If you’ve already utilized HARP once, you can’t use it again.

The Home Affordable Refinance Program (HARP) is designed for those who have limited, no, or negative equity in their properties. So if you think that this type of loan is for you, make sure that your long term goals go hand in hand with your current financial plans.