Five Tips for a Successful Loan Modification

Five Tips for a Successful Loan Modification

Are you considering a loan modification as a way to solve your mortgage problems? It's a great way to get yourself back on track financially, but how do you make sure you do it the right way to maximize your potential benefits?

If you are one of the millions of Americans who are in trouble with their mortgage loans, a loan modification may be one of your last resorts to get out of trouble and get back on financial track. But before you go through with a loan modification, there are some things you should know so you come out of the process in a better situation than you are in now. Here are five tips to help ensure a successful loan modification so you can stay in your home.

Hire a Housing Counselor
A housing counselor is trained to work on your behalf. When applying for a loan modification, a housing counselor is able to make counter offers and offer advice based on statistics and other information so you can make the best decision about your mortgage. Housing counselors do this type of work every day so they can pretty much tell you what’s going to happen and what you are going to qualify for. You can find a housing counselor certified by HUD by calling (888) 995-4673.

Determine the Best Option for You
Many troubled homeowners go through a loan modification simply to buy themselves some time with their payments. Unfortunately, as a result of this, they often do not choose the best option for their particular financial situation and they find themselves in trouble again before long. The best thing to do is to know your options, such as forbearance, repayment plans, lower interest rates and others. The more options you know about, the better position you are in to choose one that you can handle until you are back on track financially.

Be Reasonable and Fair
When trying to get a mortgage loan modification, it is important to be reasonable with your expectations. Don’t expect your loan provider to give you a handout or to do something they wouldn’t normally do. You are not going to get half of your loan forgiven or anything like that so don’t expect it. It is more realistic to expect a modification if the terms mean that you are paying less than 31 percent o f your gross income each month. Otherwise, you may have trouble qualifying for a mortgage modification.

Take Responsibility
It doesn’t help your situation to inflate your budgeted expenses in hopes of getting a lower payment on your loan modification. In fact, doing this may just result in your loan provider or housing counselor telling you to crunch those figures again until you can come up with a decent mortgage payment each month. Inaccurate information will only cause more trouble for you when applying for a loan modification so do it right the first time.

Know Your Stuff
Knowing mortgage terms and vocabulary is ideal when applying for a modification. You won’t be able to successfully change your mindset until you start educating yourself regarding your payments, obligations and responsibilities.

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  • Andrew Holiday

    September 28, 2010

    Home owner’s who want to keep their home have 3 options if they are struggling to make their mortgage payment or their home is upside down in value 120% or more…

    1. Do nothing. Pay what you always pay and get what you always get.
    2. Loan Modification- Lower your monthly payment 25-50% reduction of monthly payment possible today, all arrearages can be forgiven and the loan reinstated without having to come up with back payments.
    3. Principal Reduction Program- True Short Refinance where you keep your home, stay
    on title, get a new Lender and new loan reset down to today’s LTV.

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