Get the answers to some of the most frequently asked questions surrounding the business of modifying a home loan in today's real estate market. Getting your lender to agree to alter your existing mortgage can be the best way to hang on to your home and protect your credit. Read on for the answers to some of our customers' most common questions.
What can a load modification accomplish?
Borrowers in distress can accomplish a lot by requesting modifications to their existing home loans. If you are facing foreclosure, recently endured a serious financial hardship like the loss of a job, a cutback in pay or hours, or an illness or death in your family, or if you are slowly getting in over your head making payments that you cannot afford, there is a light at the end of the tunnel. Some potential changes that can be made include increasing the length of your loan, reducing your interest rate or fixing it at an affordable point, or decreasing the principal balance in order to make it commensurate with the current assessed value of your property. All of these changes translate into lower monthly payment for homeowners, helping you to avoid foreclosure, late fees, and other bad marks on your credit score and keeping you and your family in your house.
Why would a lender be willing to modify my loan?
Is your mortgage company simply run by kind-hearted people who want to help struggling homeowners? In some cases, that might be the truth. In others, mortgage companies are compelled to work with people like yourself on loan modifications in order to preserve their own financial interests. It is very expensive for a lender to go through with a foreclosure on a property, and in most cases, they will never recoup even nearly the full amount owed to them at auction or by selling the real estate quickly. That is why it is preferable for them to evaluate your current situation and figure out a way for you to keep paying, even if that means accepting lower payments or taking longer until they get paid at all. State and federal guidelines now also offer incentives that encourage lenders to work with homeowners rather than mercilessly evicting them.
How long does it take for the changes to be made?
Do not expect things to move quickly. There are a lot of people seeking the same or similar alterations as you are, and the entire process involves a good deal of bureaucratic red tape that will inevitably slow things down. The wait time is approximately 2-3 months. However, you will usually not be expected to make payments during that time, which can give you the opportunity to save, save, save!
Will I qualify?
There are many ways in which an individual or family can qualify for a loan modification now. If you are behind on your payments already, about to fall behind in the coming months, defaulting on your loan, or have foreclosure looming in the not-so-distant future, or if there is already a sale date set for your property, you should be able to qualify for some alterations. However, you will also have to prove some kind of hardship – like a loss of income, death in the family, personal illness or the illness of a family member who requires your care, or other situation which impacts your finances – in order to take part. You will also have to prove that you do have (and will continue to have) the ability to make your payments easily and in a timely fashion once the changes have been implemented.
What kind of changes can I expect?
What you will be offered depends largely on your situation, the reason you are requesting a modification, and the state and federal requirements governing your lender. If you are seeking amelioration because your property is valued at less than your principal (or you are, in other words, upside down on your loan), you will likely be given the chance to reduce your principal, which can translate into great monthly savings. If your problem is that of an adjustable rate mortgage (ARM) that has adjusted out of your price range, you may be eligible for a lower, fixed rate or a change in the terms of your ARM. If your economic situation has simply changed to make your payments impossible to make, you will be able to take advantage of various options including a decreased fixed interest rate, a longer term, or another reduction that will make your monthly bills more manageable.
Will my credit rating be damaged?
If you are very close to foreclosure, behind in your payments, or contemplating a short sale, chances are, your credit has already been dinged. However, a loan modification bail out is not supposed to hurt you negatively. In fact, it is designed to save your credit by helping you avoid foreclosure or bankruptcy.
Is it too late for me to avoid foreclosure?
Even if a sale date has been set for your property, it is not too late to request alterations instead. However, you will need to act quickly. Get in touch with our loan mod specialists today!
Will I still have to pay late fees?
Legally speaking, once you have modified your loan, you cannot be held responsible for late fees and related surcharges. However, the money that you owe on principal and interest from unpaid months will normally be tacked on the to the end of the altered loan. While this shouldn't discourage you from applying, you should not expect to be completely forgiven for unpaid debt.
Should I work with a professional?
It is possible to arrange for your loan to be modified by working directly with your lender. However, most individuals are turned away when they approach on their own. It is generally recommended that you work with a professional who can help you navigate the process and achieve the best results.
