Loan Modification to Prevent Foreclosure

Q: What is loan modification?

A: A Loan Modification is a permanent change in one or more of the terms of a mortgagor’s loan, allows the loan to be reinstated, and results in a payment the mortgagor can afford. Common changes include: extending the term of the loan, changing the monthly payments, changing the interest rate, etc. Usually, the goal is to make your monthly payments more affordable.

Q: Do you have to be late on your mortgage in order to be eligible for a loan modification?

A: No, you do not have to be late, but it helps if you are. In other words, you will get more attention and help on your mortgage from your lender or servicer if you’re late.

Q: How do I qualify for Loan Modification?

A: Many home owners are in adjustable rate mortgages and are unable to refinance due to loss of equity in their home, their job, or other hardship. So, their best option is to negotiate with their loan servicing company or let the home go into foreclosure.

In order to qualif for Loan Modification you must first demonstrate to the lender that you are undergoing financial difficulties. If you have lost your job, have got divorced recently, or have had a death in the family, the lender might be more inclined to accept your application for loan modification. There is no reason to wonder whether you pre-qualify for a loan modification or not, when you can prove to your lender that the situation is serious. As a borrower, you can also try to demonstrate to your lender that you are unable to meet the current mortgage payments. If you manage to prove that, there might be room for loan modification and you could benefit from lower monthly payments. The important thing is not to default on the new payments and to set up a budget that fits that new sum each month. Last but not least, make sure you complete the loan modification application and that you show the lender that you are determined. Don’t turn in an incomplete application, or you run a high risk of being rejected. Pre-qualifying for a loan modification requires a lot of preparation and commitment but it will get you where you need to go.