Maintain Perfect Credit Score
If you are trying to continue with your mortgage payments or you have already fallen behind, then a mortgage modification can help you and can save your home and lighten your financial load but, have thought what will happen to your perfect credit score. Most commonly modifications are offered by both government programs and private lenders. Basically, these loan adjustments are designed to lower your monthly payments. But if you take care of your perfect credit score and are trembling about going forward with a modification, then there are factors that you should keep in mind. The modification is chosen by you and depending on that program the modification has chances to affect your credit scores.
How To Protect Perfect Credit Score?
Commonly mortgage modification agreements revise the terms of home mortgages. They can be used for lowering mortgage rates, extending the repayment term of mortgage loans and adding past due payment amounts to a mortgage loan. A mortgage modification itself does not affect credit, but having past-due payments at the time of a home loan modification can hurt perfect credit score maintained
Government Modification Programs: –
If you have a government-backed loan or a government-insured loan through departments like Fannie Mae, Freddie Mac, Veterans Affairs or the Federal Housing Administration then you can qualify for the Home Affordable Modification Program (HAMP).
HAMP is basically a government-sponsored program that helps the homeowners to modify their mortgages and make monthly payments more affordable. It is to be said by the Experian that according to the requirements of these certain programs a mortgage must be reported as paid in full so only going through HAMP alone would not have a negative impact on your credit score.
Lender Modification Programs: –
If you do not qualify for HAMP or you choose to go through your lender for a mortgage modification then the story can be different. There are some lenders that may report a modification as a debt settlement which will have an unfortunate impact on your credit score.
If your credit score is on the low side and you are already behind on the mortgage payments then this impact can be minimized, but, if you have maintained a perfect credit score, a knock from a reported debt settlement may have a larger impact on your credit scores.
You should ask your lender to make sure about the protection of your perfect credit score range that how they plan to report the modification to the credit bureaus before you finalize the deal.
After Modification: –
Once you have done with the modification, then you can use it to improve your credit score. Your lender has a responsibility to report your payment history to the credit bureaus and if you make your payments each month on time then your credit score will gradually increase as you build up a solid payment history.
On the other side if you fall behind on your payments under modification, then the lender will report this as well. Late payments can take a bite out of your credit score, especially if they are a persisting issue.
Comparing the Alternatives: –
A foreclosure will have a huge impact on your credit score and a lasting impact on future homeownership. It may be a year or more before you can qualify for a loan again, but, on the other side a short sale does not affect your credit score as much as a foreclosure, but it will still lower your perfect credit score and stay on your credit rating for up to seven years.
Reducing an Interest Rate Using A Modification Agreement: –
Most mortgage companies use, modification agreements for lowering mortgage interest rates. The modification agreement lowers monthly mortgage payments of homeowners and can help financially challenged homeowners to keep their homes. Modifications are also used for lowering interest rates for homes that have lost value and do not qualify for traditional refinancing. Modifying mortgage loans can motivate homeowners to stay in homes because an inability to refinance to a lower mortgage rate may otherwise cause them to unrestraint. A modification may incorporate additional adjustments to the terms of a mortgage loan according to individual homeowner situations. A modification agreement can lower the mortgage rate and extend the repayment term of a mortgage or it can also change the type of loan from an adjustable to fixed rate mortgage.
Mortgage Modifications: Things to Know
Modifying a negligent mortgage to a current status will show the negligent payments as current, but does not erase initial reporting of the negligence on credit reports. Mortgage companies approve modifications that are based on verifying homeowner hardship and a homeowner’s ability to repay the mortgage according to its modified terms. Supplying all information and documentation requested by your mortgage lender speeds up the modification approval process. You should check on the status of your modification request weekly. Your mortgage servicing company may have to get approval of your mortgage modification from the owner of your mortgage or a mortgage insurance company.