Key Tips to Developing a Strategy for Loan Modification
Whether you or a family member recently suffered a job loss, or you ended up buying more house than you could possibly afford during the era of balloon mortgages, you may find yourself considering any means possible to avoid losing your home. While home prices were on the rise only a few years ago, the exorbitant amount of balloon mortgages that were approved by some of our countries top banks made it easy for many Americans to buy more house than they possibly could afford.
Adjustable rate mortgages were equally bad for our economy because they allowed many to buy more home at an affordable rate that many were not aware could possibly skyrocket into excessively high mortgage interest rates, quickly turning their mortgage loan into something they could not afford. This caused many hard working Americans to walk away from mortgages simply because they could no longer afford the payments. If you find yourself facing the same situation, banks are now more willing than ever to work with you by assisting you in performing a loan modification on your existing home mortgage loan. Here are some simple tips that can help you develop a strategy for negotiating a loan modification with your lender so you have a better chance of getting the terms you want so you can finally have a mortgage loan payment that you can afford.
First, you will want to do your research and determine exactly where your finances stand. In order to create a realistic request for a loan modification, you will need to determine how much your house is currently worth, what the terms are of your existing mortgage, and what the future terms are if you happen to have an adjustable rate mortgage. At this point you will also want to complete a budget worksheet, available from a variety of online sites, to determine exactly where you stand. You will want to take a realistic look at how much money you have coming in each month, as well as how many bills you have that you cannot possibly afford to not pay as well as how much is left over to cover your home loan. Your budget should not include any luxury expenses, like trips to the mall, spa or even high speed internet, unless it is absolutely necessary for your job. Once you know exactly what you have available to work with you can then create a realistic request for a new payment plan based on real numbers.
Second, once you know exactly where you stand you can base your payment request on your true income. It is up to you to determine exactly how much you need to decrease your monthly payment in order to help you save your home. Your lender will not provide you with this information, and the representative or loan modification company you hire to help you with your loan modification will not be able to provide you with this information. If you truly want to save your home you need to determine exactly what you need in order to comfortably afford your house loan. Since you now know how much mortgage loan you can possibly afford, you need to determine what you want your bank to do to help you achieve that magic number. You can request they lengthen the term of your home mortgage loan from 30 to 40 years if you have a fixed low interest rate loan. If that is not a possibility and you are suffering under the weight of an adjustable rate mortgage consider asking your mortgage lender to convert your existing mortgage into one with an interest rate close to what you may have been originally paying before your rate adjusted. If this is not a possibility, simply tell your bank how much of a decrease you need to have done to your mortgage loan payment in order to make it affordable. Take for example if you calculated that you need to knock $800 off your current payment, you will realistically want to tell your mortgage lender $1200 in order to leave wiggle room for negotiations since it is highly unlikely they will accept the first request you bring to the table.
Lastly, now that you know exactly what you can afford, you need to put it all in writing. While you already know how dire your situation may be when it comes to paying your home mortgage loan, you need to give your lender more information than just you need help because your family experienced a hardship and you can no longer afford to pay like you used to. When writing your letter you will want to explain specifically what caused the hardship that is hindering you from paying your mortgage loan on time each month. If you suffered a job loss, or a decrease in salary, let them know. You will then want to explain exactly how your hardships will prevent you from being able to make payments on your home mortgage loan. If you are considering a loan modification, then its highly likely that you have already missed a payment or two, or you have had to submit a partial payment. You will want to include this information in your letter so your mortgage lender can understand that you are having troubles due to the issues you listed previously. Once you have given them the why, you will need to let your mortgage lender know what steps can be done to help you get back on track. At this point you will provide them with the terms you came up with in step 2. Whether it's a transition into a fixed rate mortgage, a loan extension, or a decrease in your monthly payment, mention it now and send your letter to your lender. Be prepared for a counter offer on your request as it is highly unlikely your lender will accept the first suggestion you make.
These are just a few of the tips that can help you develop a strategy for loan modification. Take the time to do an analysis of your finances and determine how much mortgage loan payment you can really afford, and let your lender know what they can do to help you pay your mortgage loan, and you will be on your way to negotiating a successful loan modification that will help you stay in your home for years to come.