What Does "Mortgage Modification Approval" Mean?
If you're struggling to pay your mortgage loan each month because of a financial hardship, and you're working with your mortgage lender to somehow lower your monthly payment, the words "mortgage modification approval" should be welcome ones. These words mean that your lender has approved a modification of your home loan. The end result of this -- a modification basically means that your lender has reworked the terms of your mortgage loan -- should be lower monthly payments.
Other People Are Reading
-
The Mortgage Modification Process
-
When you're struggling to make your mortgage payment each month, your best option for mortgage relief is to work with your current mortgage servicer to modify your mortgage loan. If your lender approves your request for a modification, it can choose to lower your monthly home loan payments in three different ways: It can reduce your interest rate, causing your monthly payments to shrink. It can forgive a portion of your home loan's principal balance; you'll pay less each month, then, because you'll be paying off a smaller loan. Or it can rework the terms of your existing loan; for instance, if your lender turns your loan from a 15-year to a 30-year fixed-rate mortgage, your payments will shrink because you'll be paying off your loan for a longer period of time.
Earning Mortgage Modification Approval
-
To earn a mortgage modification approval, you'll have to prove to your mortgage lender that because of a recent financial setback you can no longer afford your existing mortgage payments. A financial setback can be anything that reduces your gross monthly income or otherwise makes it a burden for you to afford your mortgage payments. A job loss, reduction in working hours or serious injury, one that prevents you from working, can all qualify as financial hardships.
-
Proving Your Hardship
-
Before you hear your lender give you your much-awaited mortgage modification approval, you'll first have to prove that your financial setback has hampered your ability to pay your home loan each month. Start by writing a financial hardship letter. This letter will explain in detail why you can't pay your mortgage each month, whether it's because of a job loss or slashing of overtime hours. Support your hardship letter by making copies of any papers that show that your monthly debt obligations have not fallen while your gross monthly income has. These papers can include your most recent paycheck stubs, current credit card bills, latest bank savings and checking account statements, or most recent federal income tax return. Send these copies and your hardship letter to your lender.
Accepting Your Lender's Approval
-
If you're fortunate enough to earn a mortgage modification approval, make sure to only accept your lender's offer if it will leave you with a payment that you can afford. If your lender offers to reduce your interest rate, but that still won't lower your payment enough for you to be able to afford it, ask for a better offer. You don't want to accept a modification only to fall behind on your mortgage payment a few months later.
-
