For whatever reason, sometimes it is not possible for a person to afford their current mortgage loan. It may be possible to change parts of the loan to make it a bit more affordable. Any time you make a change to your original terms, it is called a Loan Modification. There are many different Loan Modification programs available, depending upon where you reside. These programs are designed to help people keep their homes whenever they might be facing a significant hardship, such as a family member’s death or loss of a job. Contacting local banks and doing some research of your own can help you find a suitable program. You do not need to be behind on payments to have a lender decide to do a loan modification with you. If you are about to go through a foreclosure, for example, applying for a loan modification will place a temporary hold on the foreclosure process.
You may be a candidate for a Loan Modification if you:
1. Are unable to make your payments due to financial problems.
2. Provide proper documentation.
3. Want to keep the home.
4. Show that you can make modified payments, perhaps by making a trial payment.
5. Have a monthly mortgage payment exceeding 31% of gross income.
Usually, if applying for a loan modification, you will be asked to show many important documents, such as paystubs, bank statements, tax returns, statements of assets, signed statements of financial hardship, etc. As long as you can verify that you are having extreme financial hardship which impacts your ability to pay off your loan, you might qualify. Under most loan modification programs you will be asked to make trial payments, to show that you can successfully make these modified payments. It may not be a pleasant experience, but you might be surprised to find that your mortgage lender is happy to help you and discuss your options. Be prepared, and have all your financial statements on hand when making your phone calls to loan modification programs. If you do not trust your mortgage lender for some reason, or if your lender will not help, you will need to contact a third party to find loan modification assistance.
What Should You Avoid?
Independent loan companies can help you obtain a loan modification but sometimes it can be hard to distinguish the good companies from the bad. Avoid large fees upfront, and do not sign over your home title to anyone no matter what they offer you. It is very important that you act early to avoid foreclosure through loan modification. If you for some reason are unable to complete the modification process, you can discuss with your program provider options to help you avoid foreclosure.