Loan Modification FAQ: Your Questions Answered

Loan modification — modifying your home mortgage to make it more affordable — is quickly becoming a common method distressed homeowners are taking advantage of in order to stave off foreclosure. But just how does loan modification work? How does one qualify? Are there any negative aspects?

Here are a few of the most frequently asked question regarding loan modification.

How will loan modification help me?

Help can come in many forms. Most common among them are lowering your interest rate, rolling up delinquent payments into the principal balance, extending the term, converting an ARM into a fixed rate, and more. In short, it makes your monthly mortgage payment more affordable.

Furthermore, if foreclosure proceedings have already begun, entering loan modification negotiations can potentially put a stop to it long enough to work out a solution that will allow you to keep your home.

I can still save my home even if foreclosure proceeding have begun?

This is a possibility. However, you must act fast. In some cases, home owners are in foreclosure without even knowing it. Don’t wait until you receive notice. If you’re falling behind and there doesn’t appear to be any relief in sight, contact a loan modification company quickly!

How do I qualify?

There are different programs available, each with their own set of qualifying requirements. If you have fallen behind on your payments, have a high debt to income ratio, have had an ARM reset to a rate that is beyond your ability to pay, or have experienced some other factor that has put you at risk for losing your home, then there’s a good chance you qualify for multiple programs.

Even if you don’t qualify for an existing program, a good loan modification company might still be able to negotiate with your lender to work something out.

Do I really need to hire help? Can’t I negotiate directly with my lender?

Yes, you certainly can try to negotiate directly with your lender. However, unless you are intimately familiar with the process and have the experience, you aren’t likely to get very far.

What if I haven’t fallen behind… yet?

In the past, being behind on your mortgage at least 60 days was a common requirement to qualify. But with the current housing crisis the rules have, and continue to, change. There are instances where you may still qualify even if you are current on your mortgage payments.

How long will it take?

Depending on several different factors, it could take a few days to a few months to work out a solution. The sooner you act on your situation, the better.

Loan modification is not a cure all, nor will it save all distressed homeowners. The only way you will know for sure is to contact a loan modification company to find out for yourself.