If you're underwater on your mortgage or your credit is a little shaky, a HARP refinance could net you a better deal than you expect. Here are--drum roll, please--five advantages of the Home Affordable Refinance Program (HARP) refinance.

Five Advantages of the HARP Refinance

The Home Affordable Refinance Program (HARP) was created to refinance creditworthy homeowners who have too little equity to get a mortgage the regular way. Unlike the Home Affordable Modification Program (HAMP), you don't have to demonstrate financial hardship or be at risk for imminent default; in fact, you have to have sufficient income to qualify for a mortgage at a market interest rate. To refinance with HARP, you must:

• Own a 1- to 4-unit home;
• Have a home loan owned or guaranteed by Fannie Mae or Freddie Mac;
• Have paid your mortgage on time (no payments over 30 days late) for at least the last 12 months; and
• Owe no more than 125% of your property value (on the first mortgage--it's okay to have a combined loan-to-value ratio over 125% as long as the holder of any second lien is willing to subordinate it to the new first mortgage).

You can check online to see if Fannie or Freddie has your loan. Then call your friendly loan servicer about a HARP refinance mortgage. Ask your current lender how much it would cost you to refinance under HARP. Get your Good Faith Estimate, then do a little shopping and compare it to the refinance mortgage rates of other lenders.

5 Reasons to HARP to It!

HARP refinance mortgages offer more than just expanded loan-to-value ratios. Here are other benefits of refinancing under HARP:

1. A reduction in property value doesn't hurt you. If you don't have mortgage insurance (MI) on your current home loan, you won't be required to add it with less than 20% equity; you don't have to have MI even with negative home equity.
2. Similarly, if you have existing MI coverage now, you won't have to add extra coverage even if your equity has decreased. With a normal refinance, you would.
3. You will probably incur fewer surcharges. Loan-level pricing adjustments (LLPAs) max out at 2 points under HARP (1.5% with a 15-year mortgage), so if you have factors that would normally drive up the cost of your loan--for instance,a low credit score, a condo or manufactured home, or a high loan-to-value ratio--you won't pay through the nose for refinancing your mortgage. Without this cap, you could end up with 5 extra points added to your loan fees.
4. Unlike regular refinances, having your home on the market doesn't necessarily disqualify you from refinancing.
5. There is no minimum credit score requirement.

Shopping for a HARP

When shopping for your HARP refinance, provide everyone with the same info--your property value, loan balance, and an approximation of your credit score. If you use a new lender, have your application underwritten electronically before an appraisal is ordered. You want to make sure that you get an approval from the automated underwriting service and (if applicable) mortgage insurer before spending money for an appraisal. If your application isn't approved electronically, it has to be underwritten manually--and in that case, only your current lender can refinance you with a HARP loan.

The other issue that you might come across involves mortgage insurance (MI). If you have a mortgage insurance policy now, you just keep it if you refinance with the same lender. With a new lender, you have to get a new policy, and if your credit rating has slipped, finding new MI coverage is like getting through a maze blindfolded and backward. However, mortgage insurers are coming up with new programs all the time, and this step will probably get easier as they do.