What Income Can Be Used to Apply for a Loan Modification?
Homeowners struggling to make mortgage payments should typically apply for a loan modification using all of their current gross income. Specific lenders may have exceptions to this rule of thumb so be sure to obtain clarification from your lender. When calculating gross income, include such items as wages from a job, profits from a business or income from investments. Each individual who signed the mortgage should include his gross income in the total.
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Calculating Gross Income
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Prior year tax returns are a good resource to determine past gross income. However, a reduction of current income is often the reason homeowners need to apply for a mortgage modification. Job loss or long term pay cuts are frequent causes. Self-employed individuals may also experience business slowdowns that lower income. Comparing past gross income from a tax return, projecting income for the current year and totaling current expenses can help a homeowner arrive at an affordable monthly payment to present to the lender.
Planning for the Modification Application
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Gathering personal financial documents needed to complete the modification application is a first step. Government housing agency websites post checklists of documents commonly required by lenders. Collecting and organizing necessary documents before picking up the phone to contact your lender will provide a foundation to verify financial hardship the lender will need know about to approve the modification application.
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Discovering Available Programs
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Websites for government sponsored housing agencies, such as Fannie Mae and Freddie Mac, have online calculators and checklists as well as links to assistance programs for homeowners experiencing financial hardship. Be aware that programs can change over time, so you will need to call the appropriate agencies or check their websites to determine what's currently available.
Discovering Who Owns Your Mortgage
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It is also crucial to find out who actually owns your mortgage so the right people can be contacted from the start. The company that made your loan or the company receiving your mortgage payment each month may not own your loan. Checking with Freddie Mac and Fannie Mae to determine who owns your loan.
Contacting Your Lender
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Once your documentation is organized and you have completed your budget calculations, contact your lender to apply for the modification. Prepare an explanation of your situation to help the lender understand why you need payment adjustments.Think about potential questions your lender may ask and prepare your answers. You may be requested to speak with more than one person. Ask about the lender's time frame for completing the modification.
Beware of Scams
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The mortgage loan modification process can be time consuming and frustrating. When faced with possible foreclosure, it is tempting for a homeowner to seek outside help. While there are honest and knowledgeable people and organizations available to assist you, be careful of potential scams that will cost you money and may also delay real progress toward negotiating a workable mortgage modification with your lender.
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