Trying to get a loan modification can be very frustrating.
So many people we talk to tell us they have been trying for months to get a loan modification…only to get the runaround from their lender.
But First, What Is A Loan Modification?
A loan modification is changing the terms of your existing loan with your existing lender. By the way, it is not a “re-modification.” What terms? First, if you are behind on your payments – we call those missed payments the “arrears” – you have to catch up. In a loan modification, the arrears are added to the principal balance. Then, you get a new – hopefully lower – interest rate and then the number of years is reset to zero and now you have a new 30 or 40 year loan with a new principal balance and a new internet rate. Hopefully, all of that translates into a new monthly payment you can afford.
That last part is important. “…you can afford.” If you can’t afford to make the payments, you won’t qualify for a loan modification. If you want to find out if you qualify for a loan modification, read our post: Do I Qualify For A Home Loan Modification?
How Do You Know If You Can Afford The Monthly Payments?
There is a simple rule of thumb to help you know right away whether or not you will qualify for a loan modification. Take your gross monthly income and multiply by 0.30. That’s 30% of your monthly gross income. That number is where your lender likes to see your monthly payment. If you are self-employed, there are special considerations. If you want to find out if you qualify for a loan modification if you’re self-employed, read our post: Will I Qualify For A Modification If I Am Self-Employed?
If I Don’t Qualify, Where Can I Get More Income?
- Get a second job.
- Rent out a room.
- Get your kids to contribute.
Ok, I Think I Can Qualify. Now What?
All of the banks use pretty much the same forms. Go to your bank’s website and search for the form. Or, you can contact your bank directly and have them send you the package of forms. Complete the forms and attach all of the documents requested by the bank.
The Biggest Reason People Don’t Get Loan Modifications.
The single biggest reason people don’t get a loan modification is: they don’t submit all of the documents requested. You must submit all of the documents requested.
It may take 3-6 months of calls, faxes, emails, letters etc. to get help before you get relief.