Is Loan Modification For Me?
- Are you behind on your mortgage payments?
The truth of the matter is that your lender is unlikely to pay attention to your request for a loan modification unless you are at least one payment behind. For most people interested in a loan modification this criterion is already met. For those people who are current in their payments, this creates a dilemma. Should I hurt my credit score by falling behind? - Are you in foreclosure?
If you have not received a notice of foreclosure or have just received one you are still likely a candidate for loan modification. If you are within three weeks of the date of foreclosure, then you need to hire local legal counsel to advise you as to your rights and as to what actions are available to attempt to obtain relief. - Do you have a previous Loan Modification?
Having a prior loan modification generally does not preclude you from obtaining another. However, realistically, if you want to obtain a second modification you will need to have exceptionally valid and verifiable reasons to explain why you were unable to fulfill the terms of the first modification and yet will be able to keep your commitments for the second. Generally a second modification should not be sought until 12 months after the first modification. - Do you really want to stay in your home?
This is an important question, which has little to do with emotion and a great deal to do with commitment. Seeking a loan modification to enable you to remain in your home is a decision that should not be taken lightly. You will need to obtain excellent help in understanding the benefits and burdens of loan modification. This should come from some one who will become familiar with your financial situation and who will be willing to speak frankly to you. - Do you have equity in your home?
You need to analyze the current market value of your home. If you have "negative" equity it may not be worth your while to remain in the home. If you have a large amount of equity your lender may be more interested in taking your home in a foreclosure. The amount of equity, though it is a very important factor, must be analyzed in light of your income, hardship and other relevant factors. - Have you tried to negotiate with the lender?
This is one of the most telling experiences a homeowner can have. To get the lender's attention and then to establish regular communications is difficult, if not impossible. Professionals even have a difficult time, yet without regular communication no modification is possible. - Have you experienced a "hardship" that has made it difficult, if not impossible, for you to make your mortgage payments?
This is a must in order to qualify for a modification. Hardship may come in many forms. Loss of a job, cut in wages or cut back of hours, adverse medical conditions, death of a spouse or caregiver, are just some of the circumstances, which may cause a lender to be motivated to modify a loan. - Are you now in a position to make mortgage payments, but not the originally agreed to payment?
You must be able to demonstrate that if the lender is willing to modify the loan terms and payments, that you will be very likely to consistently pay the adjusted amount. It is not enough to be well intentioned. You must closely examine your financial assets and income and determine if you can realistically hold up your end of the bargain. - Do you have proof of your current ability to make mortgage payments?
Pay stubs from your employer are the usual documentation, however, other forms of documentation may also establish your ability to pay. Individuals who are "on commission" or who are self-employed, require special handling when it comes to verifying their ability to pay. - Do you have the latest two years of your Federal Income Tax returns?
This element seems self-apparent, but often presents problems. If you are on an extension you may be required to explain the reason for the extension or to supply alternative documentation to demonstrate what your returns are likely to disclose. - Are you willing to prioritize your payments so that your mortgage will be paid before your other bills?
Like item number 4 above, this is a highly personal question, which must be thought over before seeking a modification. It is one thing to contemplate the discipline necessary to make this commitment and it may be quite another to attempt it without a plan in place. People often need help in understanding just what it takes to make this commitment. - What is the current condition of your credit?
It is NOT necessary to have good credit to qualify for a loan modification. - How long will the Loan Modification process take?
The loan modification process seemingly should be able to be done within a week or two, but the sad truth is that lenders are overwhelmed and a more realistic time frame is 6 weeks to several months. - Is Loan Modification the same a refinancing a loan?
Loan modification is not the same as refinancing. Refinancing involves credit approval, which is not a part of loan modification. Refinancing also involves payments of points, taxes, title and insurance fees, all of which are not involved in loan modification. - Should I consider bankruptcy?
Bankruptcy is not completely incompatible with loan modification; however, no modification can be accomplished until the bankruptcy court releases the loan from its jurisdiction. This is a process that can take many months. You should consult with an attorney specializing in bankruptcy before making this important and far reaching decision.
