Tips For Avoiding Foreclosure Through A Mortgage Loan Mod
The foreclosure figures in this country are truly staggering. Many of these homeowners have already lost their homes, many others live in fear that the notice of foreclosure will be served any day now. If you are one of the many people who is under the threat of foreclosure on your home, there are some important things you should know about the process of getting a mortgage loan mod.
What is a mortgage loan modification?
The first thing to note about a loan modification is that it is not the same as refinancing your home. When a mortgage loan is secured, there are usually only three variables in the terms: the interest rate, the principal, the term of the loan. It does not require appraisal of the home, lengthy credit checks and qualifying documents as would be the case with a refinance.
Many homeowners today have discovered that they are trying to pay a mortgage that has payments greater than they can afford because the original loan was too large. The interest rates may have been a variable or adjustable rate or have been structured with a balloon payment after two or three years. A modification adjusts one or more of the three factors to bring monthly payments to a more affordable level for the homeowner.
Qualifying for a Loan Modification
A real hardship situation is the first requirement to apply for a loan mod. This may be due to loss of wage earner income, illness, or death in the household. The loss of income for whatever reason may have made it impossible to meet mortgage payments at their current level.
Your mortgage payment must be in the range of one third to one half of your income. Sometimes higher debt ratios are approved if the other qualifications are met. Your mortgage loan must be aged for at least nine months; longer is better. Finally you must demonstrate that your existing and foreseeable income source will allow you to meet your modified payment schedule.
What can the Lender Do?
Banks have been directed to make every effort to modify monthly mortgage payments in an effort to prevent the increasing level of homeowners from losing their homes. The housing market has deteriorated as the inventory of unsold homes increased drastically. Some speculators have purchased homes in foreclosure for just pennies on the dollar. Lenders are urged to modify terms to reduce the monthly payment account.
Face Up to the Problem
Embarrassment and inaction are not the way to get a loan modification in process. Economic factors that are nationwide can be blamed for foreclosure woes. Individually you are not to blame, except if you do nothing to solve the problem.
Completing the process for a mortgage loan mod is not complicated, but it must be done correctly, and inaction could cost you your home. You can prepare for a call to your lender by gathering needed documents such as the original mortgage, income statements and projects and a plan for what you can do financially to solve the problem. Make sure you are realistic about projected earnings, or you could find yourself in the same position in a few months.
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