Loan modification approvals are up to the discretion of your lender. Some are considerably more flexible than others are. In any case, you will need to show that you will be able to pay the reduced payment. You cannot get a loan modification if you are unemployed, or you have just filed for bankruptcy protection. If you are turned down for a loan modification find out if and when your lender will be holding an open meeting to approve loan modifications. They are becoming more common since the mortgage crisis began in 2009. It is possible to get approved at one of these, even if you have been turned down.
Some loan modifications reduce the interest rate you were paying while leaving the term unchanged. This will lower your payment, but it may not be low enough for your current circumstances. Other lenders will revert your term to its original term or even extend it further. The longer the term is, the lower the payment will be. A few lenders are lowering the principal balance. This is particularly true in areas where property values have plummeted.
If your lender will not approve you for a loan modification and you are several months behind in your mortgage payments, there is a good chance that you will soon be in foreclosure. A foreclosure proceeding typically takes about four months. You usually have three months to bring your payments current. At that point, you will receive a notice of sale and you will usually have 30 days until the sale date. You should contact your lender before that happens and see if he is agreeable to a short sale.
A short sale agreement will allow you to stay in your home while it is for sale. If your mortgage balance is higher than your homes appraised value, this is a good option. You can sell your home at or below the current market value. This will have an impact on your credit, but it will not affect it as much as a foreclosure. This is an ideal time for you to save some money for deposits and moving expenses.
Contact your lender at the first sign of financial problems. Loan modifications can take several months. If you cannot qualify for a loan modification, see if you can get your lender to agree to a short sale. Talk to a couple of local realtors to determine a realistic selling price for your home and see if your lender agrees.
- Photo Credit Jupiterimages/Comstock/Getty Images
How to Stop Foreclosure With CitiMortgage
CitiMortgage is a company that is willing to work with its mortgage customers to help them stay in their homes. This requires...
How to Change Homeowner's Insurance in Escrow
If you own a home with a mortgage balance, there is a good chance you pay taxes and insurance. When your mortgage...
Why Would My Bank Want Me to Refinance My Mortgage?
There are many reasons why banks actively seek to refinance mortgages, but profit levels and fee income are among the primary reasons....
What to Do If Your Loan Modification Is Denied?
Jumping through the hoops of your mortgage company's loan modification process is stressful when you believe you have few other options. It...
If I Am Behind on My Mortgage, Can I Still Refinance?
A lender will generally deny a refinance with more than one past due payment within the past year. However, alternative solutions do...
Do I Have to Pay My Mortgage During a Modification?
Tough economic times have created a situation where many homeowners can no longer afford the home they are in but are unable...