When a homeowner is distressed, the loan modification process can be both confusing and frustrating. If you are thinking about asking your lender about a loan modification to keep your home out of foreclosure, you should start by doing as much research as possible in order to prepare yourself and present an excellent loan application.
In order to educate you about loan modifications and let you know what to anticipate, here are the Top Ten Questions people ask regarding the loan modification process:
1. What is the definition of a loan modification?
A loan modification permanently alters at least one term of a borrower’s home loan, allowing the loan to be reinstated and resulting in an affordable payment for the homeowner.
2. Is the lender allowed to add late charges into the loan modification?
According to HUD, the accumulated late charges should be dropped by the lender during the process of the loan modification — this changes depending on the type of loan, but will always require a complete breakdown and description of all fees and penalties from your lender.
3. Do banks have the right to force an inspection of the inside of a property if its condition is in question?
Certainly, a lending institution has the right to investigate anything the could materially affect the value of the property in a negative way.
4. What qualifications are required in order to obtain a loan modification?
The most important thing your lender will want to evaluate is your ability to afford the modified monthly payments, now and in the years to come.
The lender is going to request documentation of your income and a complete statement of your financial position, documenting your income and expenses, so the lender can determine if you will be able to make your modified monthly payments.
5. To qualify for a loan adjustment, do I need to be behind on payments?
Currently, many lenders will accept loan modification applications from homeowners who have not yet fallen behind in their payments, but who can prove that with upcoming interest rate increases, they will be unable to afford their loan payments under the existing terms of the loan.
You should contact your lender immediately so that you can begin the process of loan modification, no matter if you are delinquent or not.
6. What type of hardships are considered acceptable?
Every homeowner has their own personal reasons that caused them to fall behind on their home loan, but usually the lenders believe divorce/separation, loss of income, death of spouse, co-owner or family member, sickness, relocation of jobs, and military service are all acceptable reasons to qualify for loan modification. It helps to include a convincing letter in your loan modification application; this can prove to be a very valuable piece in successfully getting your loan modification approved.
7. Will this help me to avoid foreclosure?
Yes, the ultimate goal of a loan modification is to avoid foreclosure. While working with your lender to find a solution to your financial problems, your loan is brought up-to-date and the foreclosure process is stopped.
8. Is it possible to add my missed payments back into my new loan modification?
Yes, you can add your past due payments into the new loan; this way they can be amortized over the loan repayment period and your loan will be brought up to date.
9. Will I be able to complete a loan modification by myself or should I seek representation?
This is your choice and also depends on how comfortable you feel about dealing with your lender; your financial situation could also make this decision for you because most loan modification companies ask for a large upfront fee. No matter what, the first step is learning everything you can about loan modifications, your rights as a borrower, and how to successfully secure approval of your loan modification application.
10. How do I begin the process to have my loan modified?
Educate yourself as much as possible about the process involved in loan modification before you get in touch with your bank’s loss mitigation department or a loan modification company.
The Internet is loaded with information about loan modifications, and it can be quite daunting to wade through all of it and organize it into a format you can understand. A great source of information for you would be The Complete Loan Modification Guide. This is an inexpensive, user friendly, instructional guide that will walk you through the Seven Steps to a Successful Loan Modification; you will also receive all of the required forms with complete instructions on how to fill them out. Instructions will be given on how to write a hardship letter that is short and to the point, with sample letters added for your reference. Reading the Complete Loan Modification Guide is going to spare you a great deal of aggravation by walking you step by step through the process of securing a loan modification. Read it before you talk to your lender or loan modification company. Get moving and stay informed!
Larry Benton is a Certified Mortgage Consultant (CMC), with special training in forclosure abatement, loan modification, and other loss mitigation techniques and processes. If you, or someone you know needs assistance or more information contact Larry directly at 877.805.2905 or firstname.lastname@example.org or www.themortgagecoach.net