Loan Modifications
January 17, 2012 by admin
Since there is such a large number of houses on the market in foreclosure, many lenders have decided to be more lenient and offer loan modifications to help stop the foreclosure process. Lenders have instated various different kinds of programs so it’s best to contact yours and find out the details. They will firstly ask you why you are behind on payments and you should be completely forthcoming about the reason. 
Then they will discuss what they can offer you.
One of the options is to use any existing equity you have in the property to refinance the missed payments. The closing costs can also be financed this way and is usually the smartest and best route to take. Of course you need the equity however, which means you must owe less on the property than it’s current market value.
If you are the victim of financial hardship, some lenders will offer loan modifications to ease the payments, but you will have to prove your current income as well as the situation you are in, whether it’s a death in the family, divorce, unemployment or medical bills.
A reduction on the principle is also sometimes offered to ease the burden and in some cases lenders are even required to do so by the government. This is a good option if you owe more than the property is worth. Discuss this option with your lender, and if it is available, ask them what paperwork is required to apply for it. Usually the place to start is by getting an appraisal for the true value of your home. Failing that, your property tax records can provide some insight as well.
If you apply for a loan modification and are rejected, it might be worthwhile to try again in a few months. Many lenders don’t keep proper documents about who has applied or been rejected. They might just find themselves under more pressure as time passes so it couldn’t hurt to ask again – they might just approve you.
Keep in mind that the cost of putting together loan modifications falls on the beneficiary – you. You will be responsible to pay for the fees associated with putting the package together. Many assume that these costs are somehow rolled into the plan, but this is usually not the case. The costs can be anywhere between 1 and 5 thousand dollars, so be prepared.