Can’t Pay Your Mortgage? Consider a Loan Modification.

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A loan modification is a form of financial relief process that helps homeowners who are struggling to pay their mortgage payments.

Are you currently having difficulties paying your mortgage because you lost your job? Perhaps somebody in your family got sick? Maybe your business has failed and you’ve got no Plan B?

Many times, life can take us by surprise. Unfortunately, most of the time, there’s no quick fixes to these troubles. There are, however, steps you can take to get back on track.

In the case of mortgages, defaulting on your loan and damaging your credit to failure of paying your dues is not really the automatic outcome.

If you can prove that you’ve been a good payor until some financial trouble messed you up economically, you may qualify for a mortgage loan modification.

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What is a loan modification?

Basically, a loan modification is a permanent change in your loan terms done to make your home loan affordable and therefore prevent your property from getting foreclosed.

The lender may cut a part of your principal balance, reduce your interest rate, or lengthen your loan term in order to arrive at a resulting arrangement that is favorable to your situation.

Though feasible, a loan modification process is sparely granted and largely depends on the lender’s interest. But if you can adequately show proof of your situation, it can work very well in your favor.

What are the conditions?

Anybody having difficulties in his or her mortgage will not just automatically qualify for a modification. The lender has to assess evidence of your claim to see if they can change the original terms.

Typically, lenders look for the following conditions before they can give a nod for a modification:

  1. Is the property in good condition?
  2. How long has the borrower had the mortgage?
  3. Has she or he been paying on time?
  4. How many months is she or he already late on payments?
  5. Does the borrower still has a means of income to pay for a mortgage given the monthly amount is reduced?

What qualifies for “financial hardship” and how do I document it?

It’s not enough for you to tell your lender about your failed startup business – they will not take your word for it. When you ask for a modification, expect your lender to ask you for proof. You can document this “hardship” via paystubs, tax returns, bank statements, medical bills, unemployment checks, etc.

Any legal document that complements your claim of financial difficulty can help you get the modification you need.

But before anything else, you have to send your lender a letter explaining your predicament and why you are in such trouble. This letter could be a couple of pages long, detailing your current expenses and contrasting them against your income. Figures will speak for themselves.

Forward additional documentations as they are needed.

What happens then if I get approved?

If your lender sees through your situation and nods to your request, your payments will be put on hold (up to 60 days) until the final terms are made available.

Once done, you will receive a written modification agreement containing the new terms of your mortgage. Sign and return the forms after reviewing. Sometimes, the lender may also ask you to include one month worth of payment based on the new terms.

A loan modification is your best shot at not damaging your credit terribly and losing your home. If you’re honest to your narrative and have the papers to show for it, go ahead and get started with your modification process before it’s too late.

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