How To Modify Your Mortgage
Loan modification is like a mortgage refinance with the objective of finding a more affordable payment scheme on your mortgage to help you out with your financial situation. It will simply change the terms of the mortgage that you currently have, instead of applying for a second mortgage.
The Obama administration has several different programs in places to meet a wide variety of needs for both the lender and the borrower. It is specifically aimed at home equity loan products. The program offers financial incentives to those banks that can successfully modify bad loans. This is in hope of alleviating the weight of second mortgages.
There are a number of different programs based on certain criteria so if a person doesn’t qualify for one program they may qualify for another. You should also own the property in question and it should be your primary residence. The idea is to protect you from further hardship by lowering the interest rate based on your debt ratio and overdue principal.
You can start applying for a loan modification on your home mortgage if you have become more than ninety days delinquent. However, you can not purposely default on your mortgage just to get a loan modification. The lender would be requiring a documentation of your financial hardship before they can start working with you.
The loan modification is tedious at best and can take months to reach a conclusion and the paperwork is challenging to say the least. First you have to find out the servicer or lender that currently has your home mortgage. In this economic condition, mortgages are often bought and sold. Search for your current lender at your mortgage coupon book or statement. Then, call the lender to verify if they really have your mortgage.
Lenders have different programs as well as different criteria for deciding who qualifies and who doesn’t. But all of them are relying on similar factors to grant an approval for loan modification. You should be able to prove that you’ve made all efforts to meet your mortgage payments and you should be able to demonstrate your capability to make the modified payment scheme.
To get you started, write a letter explaining your hardship. Gather documents of your current income and financial situation to prove your ability to make the modified loan payments. You may also need to submit a detailed monthly expense report.
Loan modification on your home mortgage can work to the banks advantage, too. Banks would rather grant a loan modification than letting their borrowers default on the whole mortgage. This makes a perfect business sense to the financial institutions and the best alternative for you as a homeowner.
Nick Nunez on July 4th 2009 in Real Estate
