Author’s Bio : Jessica Bennet, with her vast experience in the mortgage industry has been associated with the MortgageFit Community as a Mentor. Not only does she participate in the community forums to give her suggestions, but also makes her contributions through different articles on mortgage.
If you are experiencing any trouble with your current mortgage payment, then mortgage loan modification may be a favorable option for you. Often termed as loan modification, it is a restructured payment agreement between the mortgage lender and the borrower with revised interest rates and terms. The purpose is to help the borrowers stay current on their mortgage payment. It is a better alternative to bankruptcy or foreclosure.
Right time for loan modification
It would be the right time to go for your loan modification when you do not qualify for mortgage refinance, yet you wish to lower down your monthly mortgage payments. Also, if you have already fallen behind your monthly mortgage payments and want to stop foreclosure on your home, then it is better to think of mortgage loan modification.
How to qualify for mortgage modification
There are 6 basic qualifying factors that your lender will evaluate before granting you a mortgage loan modification. The factors are summarized in the following lines.
- The nature of your financial hardship (such as job loss, sudden medical expenses, etc.)
- You have missed mortgage payments for 3 consecutive months or more.
- You have not filed bankruptcy.
- You occupy the mortgaged property as your primary residence.
- You are willing to work with your lender for an alternative payment option.
- Your lender will also evaluate your future financial situation and equity in your property.
The lender will approve your loan modification only if he finds that you will be able to make the monthly payments, which will also favor the interest of the lender in the long run.
Documents required for loan modification
The primary purpose of documentation is that the lender wants to evaluate your financial condition along with assessing the risk associated with your loan modification. The required documents are listed below.
- Letter explaining your financial hardship.
- Your detailed monthly expense report and your budget.
- Proof of your current income and your capability to make the modified mortgage payment.
Benefits of mortgage modification
When you are experiencing loan problems, mortgage modification is beneficial for you in a number of ways. Have a look at the following points that highlights the benefits.
- Your mortgage loan will become current.
- You will be able to reduce your interest rate and monthly payments.
- Your loan will also include your past due payments.
- You can extend the term of your loan.
If you find it difficult to negotiate with your lender regarding the loan modification, then you can contact a loss mitigation specialist or an attorney, who will communicate on your behalf.
Readers: Have you ever made a loan modification? How did it go? How did it help? Would you recommend a loan modification to others? Why?
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The number of loan defaults has really knocked the heck out of 100% financing. At one time practically everyone offered it, even if you had bad credit. Times have changed!!