What Do You Mean By A Loan Modification?
A loan modification is when a bank chooses to modify your loan agreement to make your payments, and/or interest rate more affordable so that you do not default on your loan.
If you stop making payments, you lender will Attempt to repossess the property. This is called a home foreclosure .
Attempt to collect past payments
How Do You Request A Loan Modification?
Call your bank or call a professional company like United Financial Counselors. Is is important that should you use a company to assist you, make sure they are skilled in doing loan modifications. Once you have made the ‘assist me’ call, inform the company or your financial institution of your challenges and hurdles that you have experienced that is causing you not to be able to pay the mortgage. Be honest and explain your position in detail. Ask them what options are available to you in this situation. There are specific ratios involved that pertain to your mortgage modification in order to be qualified and approved.
Tip: The way you execute your loan modification application will have a huge impact on your success.
How Can A Loan Modification Help You?
The goal of a modification is to reduce a homeowner’s mortgage payment by implementing one or more of the following:
- Reducing the principal balance
- Lowering the interest rate
- Adding unpaid interest to the principal mortgage balance
- Extending the term of the loan
You should heed the loan modification tips and advice from your counselor and follow these steps to fast track your file.
Tips for Applying for a Loan Modification:
Provide Evidence of Your Financial Position
To make the mortgage modification process smoother, you need to provide the bank with a snapshot of your life with the following items:
- Bank statements
- Details of monthly income, and sources from where the money is coming.
- Monthly expenses, divide it into (food, mortgage, education, transportation, etc)
- Tax returns
- Homeowner Association Statement
- Loan statements and any mortgage agreements
Applying for a modification is no small task. You should expect to wait several weeks or possibly months after requesting a mortgage modification. Present your case as soon as possible as the sooner you start, the sooner you will receive an answer.
Some borrowers think that the bank is giving undue favor to some borrowers and only reject their application. Banks have many standards and tests that they must do prior to rejecting or accepting a file. Banks are required to be fair and pass reasonable judgment.
How Can United Financial Counselors Help Me?
Apart from the loan modification tips above, our counselors can help you to make the most out of your loan payments and to meet your financial commitments on time.
To learn more about our financial services, please visit www.unitedcounselors.org.
Read more: Having Problems Paying Your Mortgage?