In the present times, loan modification has become quite popular amongst the borrowers. With the help of a loan modification program, the lender will change the terms of your mortgage payment. Thus, it will make your payments more affordable and help you avoid foreclosure. To give you an affordable payment plan, the lender will reduce the interest rate on your mortgage, increase your loan term or lower the principal amount. At times, the lender may use a combination of these methods.
Steps to initiate the loan modification process:
- Contact the lender: If you want to go for a loan modification, you don't need to take help of a third party. You should directly contact your lender and negotiate for it.
- Write a hardship letter: In order to apply for loan modification, you will have to write a hardship letter to the lender mentioning the reasons for such an application.
- Submit required documents: When you apply for loan modification, you should submit documents like W-2, tax documents, bank statements as well as your pay-stubs.
Eligibility criteria to qualify for loan modification:
There are no set guidelines or eligibility criteria for loan medication. The lender is not legally bound to accept the request. It will remain the discretion of the lender whether or not he will consider you for modification. However, there are certain things which you need to maintain in order to get a loan modification:
1. You should have a steady income.
2. Your home should be in good condition.
3. You should have taken out the mortgage about a year ago.
4. You should be around 3 months past due on your loan payments.
When you're facing foreclosure and want to save your property, you can apply for loan modification with your lender. However, you should note that if you default on your mortgage payments after modification, the chances for foreclosure will drastically increase.
