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Loan Modification Do It Yourself Guide

bank modification loans Even though adjustable rates have adjusted for the worst and threaten to leave consumers out in the cold, a quick switch to a fixed rate could be all you need to change the fate of your financial future. If refinancing is out of the question, a loan modification could be the best solution for you. Per the $700 billion bailout of 2008, Congress has set aside substantial funds to aid middle class homeowners with loan modification programs. The immediate plan is to extend assistance under Section 257 of the National Housing Act which allows the FHA to step in and offer reduced interest rates and loan principals.

While there are several loan modification attorneys and firms that offer assistance, this is one process that you can be handled all by yourself and could save you thousands! This guide will provide you with step-by-step instructions on how to start the process and work your way to an approval.

Know Your Status

It is important to know the state of your financial situation before contacting your mortgage lender. You need to determine how much money you bring in each month, how much is allocated to bills and where costs can be cut. Although a successful loan modification will ultimately improve your credit, you may want to confer with a non-profit consumer credit counseling service for some advice. Conferring with a respectable non-profit organization would be a good place to start.

Contact Your Lender

The next step involves contacting your lender, a critical move several delinquent borrowers fail to make. Note that if you have a first and second mortgage with different lenders, you will have to contact those companies individually. When making the call, have an idea of what you need and thoroughly explain your situation. Don't be afraid to do your own negotiations and put a few offers on the table. Give them the confidence that despite your financial strain, you anticipate brighter days and are worth the risk. This process could be easier than you think.

Video: Tips When Calling In About a Loan Modification

Know What You Want

In many cases, the lender will explain how a loan modification works and walk you through a series of steps. However, it is still good to have an idea of what you want. Are you looking for a payment deferment? A reduced interest rate? Do you plan to combine your first and second mortgage? The answers to these questions are critical as they will determine the structure of the loan and what you have to pay on a monthly basis.

Follow up

After speaking with a lender, it is very important that you follow up on the application consistently, especially if foreclosure is involved. At this point you should be assigned to a worker who will be handling your case. If they tell you to wait two weeks for an answer, follow up in one to check the status of your approval and ask for it to be noted on your account that you checked in on the status.

Understand the Fees

In general, a mortgage lender will not charge you for handling a loan modification. This isn't the case when doing business with a third-party firm. Some of these companies charge over $7,000 to negotiate a new agreement with your lender, all for something you could have easily done yourself. If this is the route you take, beware of the fees as a company may have the legal right to charge various amounts after signing into a contract with them.

Do I Qualify?

Contrary to popular belief, you don't have to be behind on your mortgage to be approved for a loan modification (although some banks require 2 months overdue). You may qualify if you are experiencing hardships such as a divorce, illness or loss of income, a decline in your home value or if your lender was in violation of providing certain disclosures. If your home is in jeopardy, do not wait any longer - find out if you qualify now! A loan modification offers numerous benefits and will allow you to salvage your current loan or eliminate your second mortgage altogether. Most importantly, it will help to keep you out of foreclosure. Take advantage of the opportunity and the get the process rolling as soon as possible.

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