What Is Involved in a Home Loan Modification?
As an alternative to expensive refinancing, a homeowner may look to modify the mortgage debt for a lower interest rate, better terms or a lower monthly payment. Most home loan modifications are free or completed for a nominal fee.
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Significance
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A home mortgage refinance can cost a borrower between 3 percent and 6 percent of the loan amount, according to the Federal Reserve. Modification can save the homeowner thousands with the same result.
Function
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The modification allows the lender to change the borrower's terms resulting with a better situation for the borrower.
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Features
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The modification requires the borrower to prove the need for the change, through updated financial information, such as paystubs and bank statements.
Considerations
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Most lenders require the borrower to be current on the mortgage for at least a full year before allowing modification to occur.
Potential
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Once the borrower requests the modification and submits the information to the lender, his mortgage should reflect the changes within a few weeks, saving the borrower money each month.
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References
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