Frustration and confusion clouds the mind in today's economic state. The loan modification procedure can be equally frustrating. When you are ready to contact your lender about modifying your mortgage, you need to make sure that you are prepared in every way possible. It is essential that you gather as much information to support your claim of being unable to make your current payments. There are many areas involving home ownership that are making changes, and these changes are enabling homeowners to get help to stay in their home. This article contains answers for your most asked questions so you will better understand the loan modification procedure.
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1. What is a loan modification?
Loan modification is a process that enables a permanent change in the terms that appear in the original loan. This modification will allow the loan to be restored and the payments brought to a level that can be paid by the homeowner.
2. What about late charges and applying them to the new agreement; is it possible to include them?
According to HUD, all of the past due fees can be ignored by the lending institution at the time of the new agreement. This will of course depend on the type of loan modification that has been agreed upon. Make sure you request a detailed description of all charges that are applied to your new loan.
3. There are changes that the government is making for homeowners to keep their homes. How does this help me?
The $75 Billion Homeowner Affordability and Stability Plan is an arrangement to compensate the lenders when they offer a loan rework to their customers. The lenders are encouraged by a financial motivation to assist you to become a qualified borrower. Additionally, once you are approved, you can become eligible for a $5000 credit on the balance of your loan by simply making the monthly payment on time.
4. Is there a guarantee that I will be approved for a loan modification?
That is entirely possible; you can prove to the lender that you can make the potential payment of the new agreement now as well as the future. Having proof of your income with all supporting documents of your financial status is a must. This will support your position of being able to make payments. The lender will have something in black and white and that will be to your advantage.
5. To qualify for a loan modification, is it a requirement that I be delinquent on my current mortgage?
Because of the downturn of the economy, many lenders will accept applications from homeowners that are in good standing with their current loan. Some will apply as a preemptive strike so they will not become delinquent later and can prove that the rising interest's rates will cause them to do so.
6. Can you define what is considered a hardship circumstance?
There are as many situations as there are people. However, the following is considered general circumstances but are not limited to this list; divorce/separation, recent unemployment of you or your spouse, spouse passes away, you, the joint-borrower, or a dependent becomes ill, your job relocates you to another region, and being a member of the country's military service. To make your application complete, include a hardship letter that outlines every detail of the situation that you consider to be causing the difficulty.
7. Will a loan modification help me stop foreclosure?
Yes, by working with your lender the goal is to find a loan workout solution, your loan is brought current and the foreclosure process is halted.
8. Can the delinquent payments be included in the loan modification?
The lender can definitely add the payments to the new agreement. It can be spread out over the time of the new loan and allow the past due amount to be brought current. It is a good idea to ask for a detailed summary of all added payments and expenses that are being added to the new loan.
9. Do I have to hire someone to represent me to the lender or can I complete the loan modification process myself?
Depending on your level of comfort in approaching your lender and the submission process in general, would determine the decision you would make. Since you are already in the market for a new loan, it may not be a good idea to pay a large sum (sometimes upwards of $10,000) in up fees for someone to represent you. The idea is for you to save money. Do the research and learn about the submission procedure, your rights, and the criteria of getting an application approved.
10. How do I get started?
Research your options, learn about what a loan modification is and what it can do for you, and contact your lender for your options. Knowledge will arm you with the ability to make informed decisions.
Our new President truly believes that the Homeowner Stability and Affordability Plan will give solace and relief to millions of distressed homeowners who stand to lose their home. Even though the approval rate is not 100% it is a definite 0% is you do not even try. There are hundreds of lending institutions willing to participate in the government's new financial support plan. If they help you, they get money. If you do nothing then no one will get help.
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