Applying For Loan Modifications

When a mortgager changes one or more terms of their loan, this is termed a loan modification. The goal is to make the loan payments more affordable for the mortgager after the reinstatement. Mortgage lenders may change the monthly amortization due or the interest rates on the loan.

Why is a Loan Modification Necessary?
Typically, lenders will consider loan modifications if the borrower is having difficulty paying his or her debts or simple cannot afford the monthly payments. Refinancing a loan should occur before individuals are behind in payments. Loan modifications are reserved for individual who are three months or more behind in payments. They will leave a mark on your credit.

A foreclosure modification may be used to help stop a foreclosure on a home. Individuals may reduce their mortgage payment and keep their home. These changes may assist families financially both in the short term and the long term.

Tips for Loan Modifications

Borrowers should research the lender’s approval criteria prior to applying to improve their chances of receiving the loan modification. The borrower increases their chances of the lender approving their application by showing exhaustive efforts. The lender is more apt to approve the loan modification when all the necessary documents are presented.

With an attorney, some firms guarantee a 98% approval chance for loan modification. This will also improve your chances of receiving a loan modification.

Documents Needed for a Loan Modification

The borrower must submit a persuading argument as to why the terms and conditions of the loan should be changed. The lender will evaluate the conditions of the loan modification and make a decision.

To qualify for a loan modification, provide the lender with the following documents:

  • Hardship Letters
  • Last Two Bank Statements
  • Last two W-2s or Pay Stubs
  • Copy of Deed of Trust from the Mortgage Loan
  • Two most Recent State and Federal Tax Returns
  • Copy of a Current Driver’s License
  • Recent 401K, Retirement and Investment Accounts Statements
  • Bank Statements from the Last Three Months
  • Copy of Foreclosure Letter, if your situation warrants one
  • Copy of Rental Agreement, if necessary
  • Copy of Mortgage Note
  • Copy of HUD settlement

This is only an example of documents that may be requested of you.

Rates for Loan Modifications

Currently, the rates are for loan modifications are lower. The rates are between 3% and 4%. There are several types of loan modification programs as well as programs to help refinance your home if you are unable to qualify. The federal government has a loan modification program, and each bank has its own loan modification program. Inquire with your lender to determine the specific terms of the loan modification program.

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