A home mortgage loan modification can be a very viable option to save your home and possibly preserve the equity you have built up.
However, there are some pitfalls you must be aware of before signing any papers. Here are the main points to remember when deciding whether or not to seek a loan modification:
The first thing you should do is to contact your lender and ask for a “Loan Workout”.
This will include a list of options available to you and your lender.
Some of these may include a short sale, reinstatement, or simply extending the term of your loan.
Your lender will most likely be extremely accommodating and will work with you every step of the way.
Another option is to simply extend the term of your loan.
The interest rate on an extension will probably be higher than what you are currently paying. Therefore, if you can afford the payments, this may not be the best option for you.
However, there is a third option that may be just what you need. This option is known as a “Loan Modification”.
A loan modification would essentially “reset” your payment so you could pay less each month.
This would give you more time to get back on your feet financially.
However, there are some important points you must consider before signing any papers:
1) One of the biggest points to consider is how much “paperwork” you are willing to endure.
Many people who are looking for a loan modification do not realize they will be asked to jump through numerous hoops.
You will almost certainly be required to provide extensive documentation, undergo credit counseling, and possibly even hire a lawyer.
2) Another thing to consider is how long it will take to get approved for a loan modification. Many experts say it could take up to six months or more.
However, if you act quickly (and you really need a modification) it is possible to get an answer in as little as one or two weeks.
Is A Loan Modification Right For You?
This is something only you can decide. However, if you do a little research and ask the right questions, you should have all the info you need to make an intelligent decision.
Remember these three key points when deciding whether or not a loan modification is right for you:
1. Paperwork: How much paperwork are you willing to endure? This is truly up to you. Some people are able to handle five minutes of work while others need to be given detailed instructions on how to create their own mortgage payment book.
2. Time: How long will it take to get approved? Some people report it takes only a couple of days while others say it could take six months or more. The answer is truly up to you. However, if you are in a true emergency, it could be possible to get an answer in as little as one or two weeks.
3. Money: How much is it going to cost you? This is the most important consideration of all. Some loan modifications can be done free of charge. However, often, there is a fee for this service. In some cases, there is no fee whatsoever. Again, this is something you have to decide for yourself.
As you can see, there are many factors to consider before deciding whether or not a loan modification is right for you. It is not always the easiest option but it can be the best. So, do your research and talk to other people who have been through the process.
If you follow the advice in this section, it is my belief you will be able to get a great home mortgage loan modification. Remember these few important points when you are ready to start the process:
- You MUST be able to afford the higher payments for at least six months. (This will be determined when you apply for the modification.)
- You must be current on all of your payments. (This will also be determined when you apply for the modification.)
- You should try to negotiate with your lender for a “lump sum” payment if possible.