How to Write The Best Hardship Letter

If you are working with your lender to do a loan modification, a convincing hardship letter is a must. How to write the best hardship letter to secure your chance for a loan modification? Here are something to consider.

Instructions

1. First, calculate your current loan to gross income ratio. Loan amount must include all property related payment: first mortgage, second mortgage, property insurance, tax, home owner association due, etc. Gross income must be pretax earnings.

   If your ratio is above 40%, the bank will be willing to consider your loan modification, because you have a high chance to default if they don't do anything.

2. Next, to show the lender all your expenses. Get a piece of blank paper, write down all your regular monthly expenses - utility, cable, phone, food, child care, medical insurance, etc. anything that costs your money, write it down.

   Now add up all your expenses, then divide it by your gross income. If your ratio is above 60%, you have proven you have a hardship.

3. Third, bring up what you need from the lender. Since you are truly in trouble now, you have shown the lender that you have a high chance to default on your loan which will nobody good. So you want to show the lender that if they can do something to help you, such as bring down the interest rate to a very low number such as 1%, 2%, etc. and even better, scrape some of your principal amount, you will not default.

   This is the chance you mention your demand, remember your demand may not be accepted, but it's worth a try.

   You want to show that if your demand is met, your loan to gross income ratio will be lowered to the 30%'s which will be a normal ratio for people to keep paying their properties.

4. Fourth, in your hardship letter, mention any efforts you have been making in order to avoid default on your loan, such as no more eating out at restaurants, no more vacations, cutting cable expenses, etc. This will show the lender that you are sincere about working with them to keep the property instead of defaulting.

5. Finally, if you haven't defaulted on your loan, consider very carefully if you want to default so can add some pressures to the bank, because if you do, your credit will be negatively affected for 7 years, the consequence is very severe. For your future's sake, do not do it until this is absolutely the last resort for you.