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Getting involved in a loan modification program could potentially help you as a homeowner. If you are in trouble with your current mortgage, this type of program offers help in a few different ways. Here are a few things to consider about how a loan modification program can help homeowners.
What Is Loan Modification?
Loan modification is a program that allows a homeowner to negotiate directly with her lender. The lender will alter the terms of the loan in order to help the homeowner stay in her home. This can be accomplished by changing any of the terms of the loan. For example, the lender might lower the interest rate that they are currently charging on the mortgage. They could also change the structure of the loan so that the mortgage payment is lower. They might also even wave late fees and past due payments in order to get the borrower back on track.
When It Is Used
While this type of program might sound desirable to any homeowner, it is not available for everyone. In order to qualify for this program, you will have to be in trouble with your current mortgage. For example, if you have missed several mortgage payments and you are at risk of going into default, the lender might be willing to work with you in this regard.
Entering into this type of program is going to negatively affect your credit history, though. This means that you should not intentionally miss mortgage payments with hopes that you will be able to alter the terms of your loan. There is nothing that guarantees that a lender will be willing to alter your loan for you. This is totally at the discretion of the lender, so you should not count on its happening.
How It Is Initiated
This type of program could be initiated in a few different ways. In most cases, you will need to contact your lender whenever you fear that you cannot afford your mortgage payments anymore. For example, if you receive a notice of default from your lender, you should immediately contact them and ask if they have any loan modification programs that could help. In some cases, the lender will contact you whenever you have missed one or two monthly payments. They may automatically offer you new terms on your loan that do not have to be negotiated.
Completing the Process
In order to complete the loan modification, you will have to go through an evaluation process. You will have to provide the lender with a detailed statement of your income and your expenses. In addition to this, you will have to write a financial hardship letter that details the reasons that you are unable to pay your current mortgage payment. The lender may also have a standardized loan modification form for you to fill out. Once all of the paperwork is completed, someone from the bank will look over it to determine if they should allow you to benefit from a loan modification.
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