Behind on your mortgage payments? Help yourself now!!! Home Loan Modification Introduction
These step-by-step do it yourself mortgage modification suggestions will help guide you through the challenging process of residential loan modification. Save time and money by negotiating your own modification. In most instances, you will not need an attorney or a mortgage modification company if you are willing to put a considerable amount of effort. If you do not understand the process, call a professional such as a real estate attorney. There are no guarantees that your lender will accept your loan modification request. However, your lender does not want to foreclose on your real estate. The avoidance of the lender owning your home is the lender’s primary motivation for negotiating with you. These ideas and suggestions will give you a reasonable chance of negotiating an agreement with your lender that benefits you as well as your lender. A mortgage holder is motivated to modify your mortgage if it benefits them. With today’s depressed real estate market, lenders are willing to consider loan modifications. If for some reason you feel overwhelmed by doing your own mortgage modification, please employ a local real estate attorney specializing in residential loan modifications. You must be willing to put a considerable amount of time to achieve significant results. Comprehending the Home Loan Modification A home loan modification is a permanent alteration to the terms of your existing mortgage. If your mortgage holder agrees to modify your loan, you still have the same loan. However, the terms and conditions of that mortgage are changed. A successful loan modification will have minimal affect on your credit score because you are not applying for a new mortgage such as you would with refinancing the existing mortgage. Both the lender and the borrower should be motivated to consider a mortgage modification. Neither party benefits from a property foreclosure. The mortgage holder will lose money, the borrower loses their home, and their credit rating is diminished. A foreclosure is a stressful situation for the borrower and the lender is wasting its resources on activities other than making loans. Your mortgage holder is unlikely to modify the terms of your loan unless they are convinced that it is in their best interest to do so. A sound business plan combined with diligent and motivated effort, on your part, will provide for a reasonable chance of a successful loan modification! It is unlikely that the lender will modify your existing mortgage if they believe you can and will make the original payments. The avoidance of a foreclosure is what motivates the lender, not improving the finances of a financially secure borrower. Modification of your home loan can be changed various ways:
Your credit score is minimally impacted by a loan modification. Unlike a bankruptcy or foreclosure, a home loan modification will not appear on your credit at all. Making late payments on your mortgage does damage your credit. It is common for a successful modification to remove any arrears from your account and add them to the amount outstanding on the mortgage. This brings your payments up to date and has a positive effect on your credit score.
Overview of the Home Loan Modification Process Expect five to sixteen weeks for the mortgage modification process to be completed. The completion varies considerable from lender to lender. Many lenders are hiring extra personnel to deal specifically with loan modifications. An overview of the loan modification process is listed below:
Mortgage companies are starting to streamline the entire loan modification process. It is possible (but not probable) that you can get a modification offer during your first call with your lender. Such an offer would typically be subject to verification of your financial documents. Many lenders have their own home loan modification forms online. If they have their own forms, usually the lender will require those forms to be completed. Step 1: Collect Important Documents & Information Step one
towards modifying your residential mortgage is to gather as much relevant
information as possible. It is important to take careful notes.
Use a note pad that is used exclusively for your mortgage
modification details. Write your name as it appears on your
mortgage, complete street address, and mortgage account number.
Many times this simple information will be required of you. Your
note pad will be used as a diary for all the contact with your
mortgage holder. It is very important to keep comprehensive notes.
When you speak with a representative of the lender be diligent in
noting their name and date and time that you speak.
It is necessary
to have a reasonable estimate of the value of your home. A lower
valuation is helpful in motivating your lender to negotiate with
you. An estimate from a real estate appraiser or a Realtor will
help document your home’s worth. Step 2: Calculate Debt to Income Ratio Your lender
will closely scrutinize your debt to income ratio (DTI
ratio). Keep this in mind when you are preparing your financial
documents. The debt to income ratio is the ratio between how
much your monthly obligations are to how much you earn monthly.
This ratio is stated as a percentage rate. Your lender, as an
indication of your financial health uses this important ratio. Your lender will try to bring your debt to income ratio within their company’s guidelines by reducing your monthly mortgage payment. A denial of mortgage modification likely happens when a particular situation is deemed financially impossible. You could be in a situation that you simply cannot afford your home. A debt to income ratio above 50% would be a difficult financial situation. If the only debt was your mortgage, it would look like this: Loan Amount: $225,000 Interest Rate 8.5% Term (Years) 30 Annual Tax $1800 ($150 per month) Annual Insurance $1200 ($100 per month) Monthly Mortgage Payment $1651 (principal and interest)
Your monthly PITI (principal, interest, taxes and insurance) would be: $1980 ($1730 principal/interest + $150 taxes+ $100 insurance)
In addition, if you are gross monthly pay was $3750 Then your debt to income ratio would be 50.76% ($1980/$3900)*100 = 50.76 If your lender's target debt to income ratio was 34%, then the lender may consider lowering the 8.5% fixed rate mortgage to 4.0%. This would reduce your monthly principal and interest payment to $1074 and lower your PITI payment to $1324. This would reduce your debt to income ratio to below the target of 34% and save you $906 per month. Your debt to income ratio would be 33.94%. ($1324/$3900) *100 = 33.94 There are many free financial calculators on the internet. www.Bankrate.com has financial calculators as well as current mortgage rates. Before negotiating with your lender, calculate what interest rate would bring your ratio within the guidelines. Calculate what payment will bring your DTI ratio as close as possible to 34%. Step 3: Prepare your Income and Expenses Statement Your income and expense statement is extremely important to prove to your lender that you cannot afford the current mortgage but could afford the loan it is modified. Your lender most likely will not approve a modification if they believe you can make your current payment! Conversely, your lender probably will not modify the mortgage to terms that you cannot afford either. Do not lie to your lender! This cannot be stressed enough! You could be charged with fraud and end up in federal prison! If RealQuest values your home $5000 lower than Zillow, then using the lower independent estimate would be favorable for your modification negotiations but would unlikely be considered fraudulent. An honest portrayal of your finances is important because it will expedite your modification negotiations. Inaccurate and undocumented information will slow the process and could very well get your modification denied. Now you should complete a financial statement. This will document your net income, expenses, assets and disposable income. The form should be printed and filled out carefully. This form may be sent to your lender, if they do not have an online form or a modification pack of their own. Step 4: The Proposal of the Modification Your progress at this point should be:
All of the above items are necessary to complete a mortgage modification proposal. On the following page is a loan modification proposal example. This sample is very ambitious and asks for a very favorable modification. A principal reduction of current loan balance is possible but many times is not granted. Of course, reasonable requests have the best chance of approvals. Want to rent a home in New Port Richey
Steve Smith, investor, sinkhole buyer and real estate broker recommends that any person who does not understand the information provided here, that they should get professional help from an attorney or loan modification company.
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