Since 2006 when the real estate bubble burst, millions of homes were foreclosed, and many more are on the brink. With the recession considered to be the worst since the great depression, honest people lost their jobs and the ability to pay their mortgages. Many have discovered that a loan modification is an optimal choice to avoid foreclosure or stop the foreclosure proceedings. But with the success of the loan modification, many struggling home owners have many questions. Here are some important questions that homeowners may have.
1. What is it? A home loan modification is a permanent change to the terms and conditions of the existing loan. This usually means that the lender will reduce the monthly payments through available options. These options may include a reduction of the interest rate, the extension of the term of the loan, elimination of accumulated fees, grace period, or any combination of the available options.
2. Who can apply? In order to apply for a home loan modification, you need to have a solid and serious reason showing that your household income has been drastically decreased and that you will not be able to pay the mortgage. Some examples of such a circumstance might be the loss of a partner, recent divorce or separation, loss of employment or conversion of an adjustable rate mortgage to a fixed one.
3. Is it necessary to hire someone to negotiate my loan modification? It is not necessary to hire a firm to apply for a home loan modification as you can apply for it yourself; however, you need to prepare and organize yourself beforehand. Agents and lawyers can charge you hefty amounts of money. However, it is advised that you go for representation if you do not know the process completely.
4. I have not missed any payment, am I still eligible? Yes, you can. However you have to show that you had unexpected expanses that will hamper your ability to pay your mortgage.
5. Can the government help me? Yes, it can. Actually the new Obama administration has announced a $75 billion worth of a relief package to assist lenders and buyer to modify home loans.
6. Does home loan modification require a credit check? No, a home loan modification does not require a credit check as your lender already has your credit history. It also requires less paper work than refinancing, which involved applying for a new loan. On the plus side, it is actually good for your credit report; once you've gone through the loan modification process and have had your debts forgiven, your credit report would show that you have actually been paying your payments on time.
7. Would I be successful? Lenders want to avoid foreclosure because they want to save themselves the time and effort of finding new borrowers and doing more paper work. If you present with a good reason, a strong serious hardship or a genuine circumstance you might succeed. Most successful hardships showed job loss for a loan mod.
8. Will my credit rating fall? No, your credit rating remains unaffected by a loan modification. It is actually better for your credit rating.
9. Would the lender add the late charges and arrears to the modified loan? Per the rules of the HUD, these arrears have to be relinquished and are seldom taken out by other means.
10. How will the lender forgive pass late payments and arrears? The past arrears may be added to the loan but placed over a period of time to make the loan more feasible to be paid easily.
Hopefully this article has answered some of your questions about loan modification, and made you more aware of the benefits of loan modification. If you have decided to modify your loan you will need to do more research about the subject. That is the biggest pitfall struggling homeowners don't get the best results they can. They don't do enough research and don't understand the subject to well.
The best solution is to get a do it yourself loan modification kit. One such kit is 60 Minute Loan Modification. It include a professional hardship letter outline that will catch your lenders attention, it also includes conversations between homeowners and representatives, so that you can hear what to say and more importantly what not to say. The kit will teach you all the needed vocabulary, and most importantly the kit was created by a person who modified five of his home loans, and numerous loans of his clients. Many people used this kit with success, and overall it's a great product.
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