Can you go for loan modification?
Lenders are offering loan modification program for their suffering borrowers so that the borrowers are able to pay off the loan rather than simply not paying anything. A loan modification also comes as a relief for those who really want to save their home from a foreclosure.
Banks have also been directed by the Federal Government rules to reduce their rate of interest along with making other changes too so that homeowners can avoid foreclosure. However, the fact is that not all borrowers qualify for this. How you would qualify for loan modification depends on the guidelines that the lenders have set.
One of the very important factors that are considered is the debt ratio. Although each lender may have different criteria, what they want to see is that the payment for the new modified loan would be between 34% and 45% of the gross monthly income you generate. Your principle, interest payment, property taxes insurance as well as HOA (if needed) must be added. This total must be divided by your gross monthly salary by which you can get the percentage of your debt ratio.
You may need to design a family budget that cutting off as many unnecessary expenses as possible. This would in turn help you determine an affordable monthly home loan payment that you may have targeted. Once this is done, you can complete the loan modification forms that you got and send it to your lender for approval.
Tips to get your application approved
Like you all know, not everyone qualifies for loan modification. However, you could take a look at the following 5 tips to try and get your application approved:
- You need to convince your lender that if they modify your loan, you will be able to pay it off. Your lender must be really convinced that you cannot pay off the current loan with the current rate of interest.
- You may show your lender documents that project your financial conditions. You may then show them your planned budget that also includes a lower monthly payment plan which you can afford. While doing this, you may cut down on the monthly obligations like food, gasoline and the like.
- You may try to explain to your lender why you are in such a financial condition and what have to done to make the situation better. You must also let him know what your future plans for your future finances are.
- If you have any proof of your hardship like documents of a lost job or hours cut, you may show it to your lender. Include any medical bills (if applicable).
- Make sure you complete the forms and give accurate information. Your loan number must be mentioned too.
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