Most struggling homeowners could qualify for a mortgage loan modification and not even be aware of it. The reason is because despite the fact that a loan modification will, in the long run, help both borrowers and lenders, banks still lose money on the original loans. Obviously, lenders will do everything in their power to hold their borrowers to their original terms of the loan. There comes a time, however, when it’s obvious that default and then foreclosure are imminent. It might become evident at some time that default and foreclosure can’t be avoided. When this time comes it is time to get a loan modification.
I made this simple mortgage loan modification checklist to help you better your chances of getting qualified.
There are numerous measures a homeowner can take before foreclosure. Once it becomes obvious that your financial situation is getting tight, getting in touch with your bank or getting online and looking for other loan modification programs is a good idea. There are now federal programs such as Obama’s Home affordable Program that were created to keep struggling homeowners in their homes. Finding some help in your efforts to navigate this process can begin with programs like this one.
A loan modification takes your existing home loan and makes changes to it that can make it possible for you to pay it in a timely fashion. Your payments are decreased by reducing the principal you owe so that it matches the current value of your house, lowering the interest rate and making it a fixed rate, and/or extending the length of the loan, say from 20 years to 30 years. Late fees can either be excused or rolled back into your mortgage so that you start repayment your mortgage in good standing.
The process is lengthy and you have to satisfy certain qualifications to be accepted for a loan modification. In the beginning you must demonstrate actual financial hardship. It is more effective if this difficulty is the result of issues beyond your control. A death of a paying member or your family, job loss, a bad mortgage, divorce,military deployment and illness are all examples of hardships that are out of your control. While serious credit card debt can also be a hardship, unless you can show that you were using the credit cards as a way pay bills and eat, this might actually hurt you. It is a fine balance.
You also must prove to the bank your commitment to keeping your home and paying down the new mortgage. They will require you to come up with a budget. According to the numerous loan modification rules, your new payment cannot be over 31% of your gross monthly income. This can assist you to create a budget that you can handle.
Before you quit and walk away from your home, consider the possibility of a loan modification. A lender would rather lose a few thousand dollars on a loan than have a foreclosure property to add to their collection. The time is now for you to try and work with your bank. Many homeowners will use mortgage loan modifications to stay homeowners in these terrible times.
You can learn more about a home loan modification and get a step-by-step checklist to help you through the process. Learn how to write a loan modification letter.
