How Loan Modifications Work?
There has been a lot of attention in the last six months about loan modifications. Loan modifications are helping millions of homeowners keep their homes. With a loan modification, your lender modifies your existing mortgage to lower your interest rate, transfer any arrearages to the back end of your loan and extend your loan term. The end result is you now have a lower and affordable monthly mortgage payment.
Who Qualifies?
Homeowners who are at risk of losing their home and who are in default. There are several programs available, so you need to check with your lender as to which one you qualify for.
For instance, under the Government’s Making Home Affordable Modification Program, homeowners who are at risk of losing their home can qualify for a loan modification if they meet the following guidelines:
• Have secured your mortgage before Jan. 1, 2009.
• Have a primary mortgage of less than $729,500.
• The home must be your primary residence and you just reside there.
• Must fully document income by submitting your tax returns and paycheck stubs.
• Sign a financial hardship statement.
• Get counseling if your total household debt totals more than 55 percent of income.
• You can only modify your mortgage once under the program.
Loan modifications are a solution only if you have sufficient income to make the monthly payments. If you do not, then other options might work such as selling your home or selling with a short sale.
How Long Does the Process Take?
From beginning to end, a loan modification can take a couple months or longer to get approved. To speed the process up, you may want to consider hiring a professional such as a real estate attorney or loan modification specialist to negotiate with your lender. HomeBackers are industry experts that can help you negotiate a resolution with your lender. Their telephone number is 937-754-1111 and their website is http://www.ImBehindOnMyHousePayment.com.
The reason you should work with loan modification experts is because they are knowledgeable about the process and have established relationships with lenders. If you don’t submit the right paperwork, you may not get approved, and you could end up losing your home to foreclosure.
The costs vary. Some companies charge a fee equal to two months of your mortgage payments, while others charge a flat fee. Shop around. Keep in mind that there are crooks in the industry that may take advantage of your situation. So check references of any loan modification company you decide to hire first to make sure they are legitimate. A certified HUD housing counselor can also help you, and they do not charge for their services. To find a list of housing counselors in your area, check the HUD website at http://www.hud.gov/offices/hsg/sfh/hcc/fc/.
Doing it Yourself
If you decide to negotiate the loan modification yourself, here are some steps to take:
1. Call your lender or loan servicer and find out if you qualify for a loan modification.
2. Download their packet of forms and complete them. If they do not have any forms, then you will need the following:
a. Hardship letter.
b. Authorization letter in case you want a third party such as your lawyer or mortgage broker to have access to your information.
c. Last two paycheck stubs.
d. 1099 or W-2 form.
e. Tax returns for the past few years.
f. Financial statement reflecting your assets and debts and liabilities.
3. Submit the paperwork to the lender for processing.
4. Call every day until a negotiator is assigned.
5. Once your lender approves, your application, you don’t have to accept their first offer. If you are not happy with what they proposed, you can counter it.
The lender is looking to make sure that you have enough income to pay for the new loan payment. So if you are not working or have no income, a loan modification is not for you.
The benefits of a loan modification are you get to stay in your home and not lose it to foreclosure. Your payments are lowered to a more affordable payment. However, if don’t make your payments on time, you will end up in default again, and may not be able to save your home. If you don’t think you can afford the mortgage payments, selling your home or doing a short sale maybe a better option for you. The best advice is to explore all options first before making any decisions. HomeBackers is available to assist you with your options and negotiations. Their telephone number is 937-754-1111, and you can visit them at their website address at http://www.ImBehindOnMyHousePayment.com
