If you are struggling to make your monthly payments, it is a relief to learn about the possibility of a loan modification. It is a terrible feeling to live in fear of defaulting on your mortgage and losing your house to foreclosure. A loan modification might be just what you need, and if so, you have to learn what to do to reach a modification agreement.
The first thing you need to do is contact a qualified financial advisor. There are two ways to do this, either from a HUD-approved note for profit group or from a professional loan modification company. You could try to complete the process all on your own, but you will have more success if you use a third party, who not only help you through the process but will also advocate for you as well.
You will discuss your financial situation with your counselor, review all your options and decide what is the best thing for you to do. If a loan modification is your best option, you will be asked to write a loan modification hardship letter. This is sent to your lender and it outlines the reasons for your hardship and why it is important you receive a loan modification in order to keep your home.
After your meeting is over, your counselor will forward your hardship letter and all the necessary paperwork to your lender. These two pieces of information will determine if you are going to be able to modify your loan. Your lender will read the letter to decide if you are serious about paying the modified loan and they will review your financial documents to see if a modification is a good option in your situation.
Many lenders now offer different types of loan modification programs and there is a government program that allows lenders to modify loans by lowering interest rates. Generally, lenders are looking for what is known as a 'debt-to-income' ratio. This is the percentage of your income that goes to paying your mortgage. If your mortgage can be modified so that your debt-to-income ratio is somewhere between 34% to 45%, most lenders will consider working on a loan modification with you.
The best thing you can do to avoid foreclosure and negotiate a loan modification is to take action as soon as you realize that you are going to have trouble paying your monthly mortgage bill. With each passing month, your options lessen.
This article is meant to help struggling homeowners through the process of negotiating a loan modification. If you being working as soon as trouble starts and your know what you need to do, you can avoid having your home foreclosed.
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