What Is a Loan Modification?
A loan modification is a process in which your existing mortgage is adjusted to make it easier for you to pay back the remaining amount. These adjustments to the existing loan might include a new interest rate (typically lower) or a different payment schedule.
The criteria for modifying an adjustable-rate mortgage include: being behind on loan payments for at least 60 days, posing an imminent risk of default, and demonstrating financial hardship, such as the loss of a job or spouse. Usually, even if you have bad credit, loan modification is allowed.
A mortgage lender will tailor loan terms to accommodate borrowers who may not be able to make their monthly mortgage payments for a variety of reasons. Loan default and foreclosure are more costly to a company than delayed monthly payments so it is advantageous for them to allow adjustments. However, the most successful loan modification procedures are handled by a seasoned real estate lawyer or a settlement firm.
How Do I Get a Mortgage Modification?
First, contact the loss mitigation department of your loan servicer, sometimes known as a home retention department, and request permission to submit a loss mitigation application. You can find your servicer’s contact information on your monthly mortgage payment statement or on their website. Then you may follow these steps to apply:
Gather Your Financial Information
There are a few important things your lender wants to know before they approve you for the modification. They’ll need information on your income and bank statements, as well as an explanation of why it has been difficult to pay the remaining loan balance.
Contact Your Lender
Your lender will discuss options that may help, including a mortgage modification. At this time, it’s critical that you be honest and leave out no details about your personal financial situation.
Fill Out the Paperwork
In most cases, lenders will request that you submit a detailed application for a mortgage loan modification. You’ll start paying your new monthly mortgage amount as soon as you get approved for the change. It’s important that you thoroughly study the new terms of your mortgage so you know what to anticipate in the future and are able to afford the new monthly payment.
Is Mortgage Loan Modification a Good Idea?
In the long run, a mortgage loan modification is a good idea if you are having trouble with your current mortgage payments, but consider the following before making a decision:
It Could Affect Your Credit
You should be aware that your credit report could show a loan modification. Although the effects of a loan modification are less severe than the effects of a foreclosure, it can still lower your credit score and affect future loans.
If you’re struggling to keep up with a mortgage payment, it might be a good idea to get a loan modification. Interest rates and term lengths are both factors in deciding what adjustment is right for each individual situation. A conventional loan modification is always a better option than foreclosure.
It Could Take Some Time
Modifications to your mortgage require a lot of documentation and paperwork, which may be time-consuming and confusing. If your situation is bad enough that you might lose your home to foreclosure, then a modification option may be worthwhile.
If you’re behind in payments or have unfavorable loan terms, you’ll want to explore loan modifications with the aid of an experienced attorney from the Kelly Legal Group. We can help you avoid foreclosure and get the loan modification you need. To receive a FREE consultation, contact us online or call us at (512) 505-0053 today!