Mortgage and Rate Modification: Understanding the Home Loan Modification Process
When you are faced with bankruptcy or foreclosure you may not know about home loan and rate modification programs available that can keep you in your home. Unlike traditional refinance options that require pre-approval and often have steep requirements, loan modifications allow you to keep your existing loan by making necessary modifications to it so you can maintain the payments and stay in your home. It is designed for the very person who would lose their home otherwise.
Your first step is to fill out a loan modification application form. Call your current loan company to request one. You can also find them online and at any local bank. The process of filling out the loan will answer most of the questions that will arise. Chances are if you get through the whole application form and have answers for all of the questions you stand a good chance of qualifying.
There are many aspect of your loan that you can modify. For example you can modify the rate of your loan. You can go from an adjustable rate mortgage to a fixed rate mortgage. This modification will keep your mortgage payment stable regardless of the economy and mortgage industry. It will also allow you to more effectively budget as you will always know what you payment will be.
You can also modify the terms of your loan. Perhaps your loan was a 30 year loan and you have paid 4 years on it. Your lender could recalculate your remaining loan back into 30 years, thus lessening your monthly payment. While this won’t save you money in the long run, it will keep you in your home in the short run and allow you that stability and security until such time as your finances improve.
You will need to write a hardship letter for most loan modification programs. The lender needs to know why you deserve the chance to re-write your loan. To do this effectively, gather up all of your financial information and get a handle on where you are. Calculate your debt and see where things began to fall apart. Get your tax returns together for the past few years and get a good look at what you make. Write down every penny you spend for two weeks and look honestly at your money habits day to day. When you write your letter it will need to be compelling but also honest and responsible.
The current presidential administration is setting policies and offering incentives to business and people who are making honest efforts to better their customers and themselves. If you can show honest hardship and effort then your bank will want to lend to you and keep you as a customer, or take you from a less helpful bank or lending institution.
Understanding the ins and outs of loan modification can make a big difference in your overall financial situation as well as ease your day to day stress. A good night’s sleep in a home you can keep will go a long way in helping both your personal and financial health and well being.
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