Steps To Take When Applying For A Loan Modification

In a previous article "How Can A Loan Modification Help Homeowners?" we covered the basics of what a loan modification is and how it benefits you if you are having trouble making mortgage payments.

In part 2 of this series we'll take a look at the steps to take when applying for a loan modification.  The process itself can be time consuming.  But taking the time to do things right and thoroughly can increase your chances of being approved.

Step 1

Contact your lender and ask for information on specific guidelines they may require in order for you to be approved for a loan modification. This is very important to know before you proceed to the next steps.

Step 2

You will need to write what is called a "Hardship letter."  This letter should explain what are the specific circumstances are causing your financial problems. Also tell your lender what you're doing to try and get your finances in order.  Remember, you're having trouble paying your mortgage so your lender needs to be reassured that you are serious and are committed to making changes.

Step 3

Get all of your bills and expenses together.  Take a look at where your money is being spent.  See what expenses can be eliminated. For example are you going out to dinner several times a month?  Do you really need the premium cable package? Create a new household budget without these kinds of expenses.  This shows your lender you understand the gravity of your financial situation and you're taking steps to make needed changes.




Step 4

It's not enough to just tell your lender you're in over your head financially.  You have to provide proof to back up what you are claiming.  What kind of documentation varies with each homeowner.  If you lost your job for example, you could provide a letter from your previous employer. Even if you're still working and due to cut backs your salary was reduced, again a letter from your employer would be needed.  If you have medical expenses not covered by your insurance, make copies of your medical bills to show your lender. 

Step 5

Figure out your debt ratio.   Basically, the more you make the more debt you can take on. But your new mortgage payment cannot be more than 40% of your gross monthly income.

Step 6

One of the most common reasons  homeowners are not approved for a loan modification is because they failed to fill out the paperwork completely and accurately.  Your lender already knows you can't make your current payment.

But the lender also needs to be certain that you will be able to make the mortgage payment even after you've been approved for a lower payment.  A lower payment does not automatically mean you will be able to make your payments. Providing "before" and "after" financial statements must show that you will be able to make your new lower payments if you are approved for a loan modification.

A Final Word Of Encouragement

You may feel like it's too much to deal with...but if you don't deal with it... you run the risk of losing your home.  So now is not the time to give up!

 You can do this!

Part 3 of this series will cover one of the most important steps to getting approved for a loan modification.  "How To Prepare A Hardship Letter" will define what a Hardship Letter is and how to write yours to increase your chances of getting your loan modification approved.

Call 888-766-3693 if you have any questions about modifying your loan.  You can also visit Qualify For A Loan Modification.




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