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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