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Can I Apply For A Loan Modification After A Bankruptcy?

Apply for loan modification after bankruptcy Have You Filed Bankruptcy, And Are You Wondering, “Can I Apply For A Loan Modification After A Bankruptcy?”

The answer is yes. You can still apply for a loan modification after a bankruptcy. Sometimes using a bankruptcy and loan modification in combination with one another can achieve the most desirable outcome in helping you save your home from foreclosure. This is especially true if you could not get approved for a loan modification before filing for bankruptcy. It is likely that trying to get a loan modification was your first course of action, but for whatever reason, your application was denied. Then you filed for bankruptcy. The wonderful thing about bankruptcy is that once you file, you can then (re)apply for a loan modification with better chances of being approved for one.

Why Should I Apply For A Loan Modification If I Already Filed For Bankruptcy?

A bankruptcy opens up the possibility of getting a loan modification if you couldn’t obtain one the first time around. More importantly, a loan modification can adjust the terms and payments of your bankruptcy and make it more reasonable.

If you want to learn about how to get a loan modification, read our post: How To Get A Loan Modification.

Or, if you are interested in finding out how a bankruptcy works to save your home, read our post: How Does Bankruptcy Help Save My Home In Foreclosure In New Jersey?

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Why Should I Act Fast In Applying For A Loan Modification?

loan modification act fastDon’t Wait! Why Should I Act Fast In Applying For A Loan Modification?

A fundamental mistake most people make is not to apply for a loan modification as quickly as possible.  You must act fast  in applying for a loan modification to save your home.  It becomes apparent when you understand how a loan modification works. A loan modification takes your missed payments and rolls them into your future payments; then you arrive at a new monthly payment, which is usually lower than the original amount because the loan typically has a lower interest rate and a longer term. The more missed payments, the harder it is to be approved.

You probably know that it takes many months in New Jersey for the foreclosure process to progress from Complaint to Sheriff Sale, but don’t let this time-frame let you think you can wait to apply.  Don’t Wait!

If you want to find out the 2 biggest pitfalls when trying to get a loan modification, read our post: Two Biggest Reasons People Fail To Get A Loan Modification.

So Why Should I Act Fast?

A loan modification is the best option for those looking to save their homes, it gives you the best outcome. But, the longer you wait, the more mortgage payments you miss. As a result, when your application is analyzed, the more payments you have missed makes the new monthly payments higher, and this makes it harder to be approved.

Loan modifications can take a long time to begin with, to increase your chances of getting approved for one, it is smart to get started on the process ASAP if you think you may qualify.

To find out if you qualify for a loan modification, read our post: Will I Qualify For Loan Modification?

And, if you think you qualify and want to know how loan modifications work, read our post: How To Get A Loan Modification. 

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Why Is Loan Modification The Best Tool?

home loan modification best toolWhat Makes Loan Modification The Best Tool?

Why is Loan modification The Best Tool? It is one of the essential tools for saving your home from foreclosure, and is the best option – if you qualify.  It will give you the best outcome above all other options– chapter 13 and chapter 7 bankruptcy being the other options. A loan modification allows you to begin a repayment plan, without the baggage that bankruptcies can carry.

Loan Modification As Your Go-To Choice

Loan modification allows you to roll all of your missed payments into future payments; your loan is re-amortized. The adjusted loan is based upon your missed payments and principal balance combined, and usually has a lower interest rate with a term of 30 to 40 years, which results in a lower monthly payment.

I’ve Decided I Want To Apply For A Loan Modification, What Should I Do Next?

If you want to apply for a loan modification to save your home from foreclosure, you should first find out if you qualify for one. There are certain criteria you must meet, regarding your income and expenses, to qualify for the loan modification. To find out if you qualify, read our post: Do I Qualify For A Home Loan Modification?

From there, if you think you qualify for a loan modification, read our post: How To Get A Loan Modification.

 

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How can I save my home from foreclosure?

It’s possible in many cases to save your home despite periods of financial difficulty.

The steps that can be taken are:

Home Loan Modification. It might be possible to reduce the payments by extending the term of the loan, adjusting the interest payments, and in some cases reduce the principal balance on the mortgage, or some combination of these three. There is a threshold of qualification for modification.  The bank needs proof of ability to pay, with the principal and interest no greater than thirty percent of income after the refinancing. Loan modification requires full documentation and takes place at a closing, similar to a purchase or sale.

Chapter 13 bankruptcy. There are thresholds for qualification. The court requires a means test, establishing that you’ll have the ability to pay on a payment plan, making partial restitution to your creditors (often at a fraction of the balance due) with the debts discharged completely at the end of the payment plan. Your home can be protected. Second and third mortgages can become severed from the home and added to the pool of consumer debt covered by the payment plan.

Chapter 7 Bankruptcy If you have limited equity in the home and enough income to pay the mortgage, it might be possible to keep your home under Chapter 7 bankruptcy.

  • If you have a very high amount of consumer debt, like credit cards debts or payday loans, it can be nearly impossible to qualify for a loan modification or a chapter 13 bankruptcy. However, a chapter 7 bankruptcy can eliminate these consumer debts and as a result allow you to qualify for a loan modification or chapter 13 bankruptcy. This little trick of using a chapter 7 to qualify for a chapter 13 is referred to as a “chapter 20 bankruptcy.”
  • To learn more about how chapter 7 bankruptcy could be a good strategy for you, read our post: When Is A Chapter 7 Bankruptcy Useful? (P.S. It even goes over what to do if you can’t save your home, or don’t want to)

 

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Do I qualify for a home loan modification?

do i qualify for a home loan modificationWhen trying to obtain a home loan modification, one thing most people want to know up-front is, “Do I qualify for a home loan modification?”

Underwriters evaluate the ratio between your income and your mortgage payments first.

Next, the underwriters look at your monthly expenses and compare these next to your mortgage payments. They subtract your mortgage payments and expenses from your income; this value cannot be in the negative in order for you to qualify.

If your debt to income ratio is OK and your expenses are not too high, you should qualify for a home loan modification which will save your home from foreclosure.

Will I Qualify For A Loan Modification If I’m Self-Employed?

If you’re self-employed, there are certain considerations that the bank makes in evaluating your loan modification application. You must organize your finances in such a way that the bank approves of. If you are self employed and trying to get a loan modification to save your home, read our post: Will I Qualify For A Modification If I am Self-Employed?

 

How Do I Get A Home Loan Modification?

To get a loan modification you must find out what forms your bank requires and send them in exactly the way that they specify. If you want to find out how to get a loan modification, read our post: How To Get A Loan Modification.