Federal Government Loan Modification Program
Mortgage loan modification enables you to modify your home loan structure so that it becomes affordable for you and helps you avoid foreclosure on your home. Millions of people who are on the verge of foreclosure understand the need to find a solution that can not only help them manage their funds and pay off debts but can also assist them in retaining their homes. Loan modification programs ensure that borrower’s get the most cost effective means of getting out of trouble thus helping home owners stay in their homes. Due to declining home values and stricter guidelines implemented by lenders home owners do not have enough option to either sell off or refinance their homes. This is why the loan modification process is helpful in making ones home affordable and avoid foreclosure proceedings which means that your home will be re-sold in the market. The loan modification program requires the borrower’s to submit an application and other relevant documents which ensure that the application will be approved by the lenders. People who want to apply for mortgage loan modification need to meet certain criteria such as debt income ratio, hardship letter stating valid reasons as to why he/she wants to opt for the making home affordable program as well as provide proof of income and employment.
The loan modification process is tedious and complex and before applying for a mortgage loan modification program one should understand the guidelines of different lenders and how to qualify for the loan modification program. An application for the mortgage loan modification must meet those guidelines. Although every struggling homeowner would like to receive a mortgage loan modification, not everyone will qualify. Each lender has developed guidelines to determine which borrowers will qualify for modification assistance. Homeowners must submit an application that documents their ability to meet those guidelines before their loan will be modified. Borrowers seeking help must meet debt ratio guidelines, demonstrate a hardship situation and provide certain required application forms and income documentation to prove their eligibility.
Debt Ratio Guidelines: Knowing how the mortgage loan modification process works and learning your lenders guidelines will help assure a good chance of approval. Once you have a good understanding of what your lender needs to see on your application, you can get to work on preparing an accurate and acceptable application. Verify with your lender what their debt ratio guidelines are-most lenders want to see a ratio of 34-45% of your gross monthly income for the new modified loan payment, including taxes and insurance. The federal stimulus modification plan targets a 31% ratio for the new modified payment. You can compute your ratio before submitting your application so that you can make any necessary budget adjustments to fall within the acceptable guideline. You may need to adjust items like your groceries, gasoline, miscellaneous expenses so that you can prove that you have enough money to pay the new payment and have a little bit of disposable income left over each month.
Financial Hardship Guidelines: A financial hardship must also be demonstrated to your lender before a mortgage loan modification will be granted. A loss of equity alone is not a valid reason for a loan workout. Each borrower has a unique situation, however some of the generally accepted hardships include:
- Loss of income-job loss, reduced hours, etc. /increased expenses
- Divorce or separation
- Military service
- Death of family member or co borrower
- Illness, medical expenses
- Natural disaster
A well written and convincing hardship letter is an important part of a successful mortgage loan modification application. Your lender will be willing to grant your modification application if you can demonstrate an ability and willingness to make the new lower loan payment now and in the future. Make sure you cover the 3 critical elements that your lender needs to know in your own hardship letter by following a simple Hardship Outline.
Your goal is to learn as much as you can about the process before you contact your lender so you will be prepared and able to meet their guidelines. Take the time to do your homework and your time and effort will be well spent. Thousands of homeowners have gotten the mortgage loan modification help they needed, you can too!
You can get the help you need to apply and qualify for a loan modification by ordering and downloading the best selling handbook for homeowners, The Complete Loan Modification Guide. This is a low cost, easy to read home edition loan mod kit that will provide you with everything you need to prepare a professional and acceptable loan modification application. You are provided with all of the necessary forms and given detailed directions on how to complete them properly. The Complete Loan Modification Guide will take you step by step through calculating your debt ratio, completing the financial statements, writing your hardship letter and then putting it all together to submit to your lender.
Alicia Pinder is regular writer for Refinanceitt.com; he suggests knowing how to apply and qualify for the Obama federal affordable modification program, and how loan modification would be helpful.
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