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If you are having difficulty paying your mortgage on time, you may want to see if your bank will be willing to work out a loan modification. With this type of program you do not need to refinance the entire loan, and it is a good way to get out of trouble if you are worried about a foreclosure. Let’s take a look at what a loan modification is and how you can take advantage of this.
Restructuring
Many times, a loan modification is also referred to as restructuring your loan. Your bank may look at your credit before deciding to do this, but more often than not they will be willing to work with you on the basis of your initial credit. With a loan modification, you can change the payment amount, possibly the interest rate and the terms of the original mortgage. For example, if you have a 15 year mortgage, your bank may be willing to add a few years to that to give you a chance to get caught up.
Restructuring a mortgage gives homeowners a chance to get a payment plan that is easier for them to uphold. Once you do get a loan modification, it is vital to make sure that you will be able to keep those new terms. Banks will typically only offer one loan modification.
In some instances the banks offer what’s called a forbearance program where the homeowner is given a few months of no mortgage payments in order to catch up financially.
Who is Eligible?
The Department of the Treasury has issued guidelines on eligibility for loan modifications. They state: “Anyone with high combined mortgage debt compared to income or who is “underwater” (with a combined mortgage balance higher than the current market value of his house) may be eligible for a loan modification. This initiative will also include borrowers who show other indications of being at risk of default. Eligibility for the program will sunset at the end of three years.”
If you bought your home as an investment, or if you are a speculator, you will not be eligible for a loan modification with your bank. It must be your primary residence to qualify under this program.
Getting Help
If you think that a loan modification is right for you, you will need to contact your bank to begin the process. Ask to speak to your loan officer and explain your situation to them. Typically, banks lose money with foreclosures and this means that they are more than willing to offer a loan modification, especially if it will help you get back to making your payments on time.
While the bank will have the final decision on whether or not to offer you a loan modification, this is certainly an avenue that is open to home owners and one that should not be discounted. Foreclosure has lasting effects for several years and should never be taken lightly. If you have the chance to modify your loan, take this step and do what you can to save your house.
It is estimated that three to four million home owners are eligible for a loan modification. Contact your bank and see if you can’t take advantage of this program.
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Tags: buy, Credit, Home, House, Loan Mod, Loan Modification, Real Estate, Realtor, San Diego, sell, Short Sale, Short Sales
Posted In Blog, Short Sales
This entry was posted on Wednesday, January 13th, 2010 at 10:41 pm and is filed under Blog, Short Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.