How Does Loan Modification Work?
Loan modification has become an easy tool in the hands of the borrowers to make sure that any changes in their financial conditions does not lead to foreclosure or other such embarrassing situations. Therefore, the people who are suffering from the woes of home mortgage are also opting for loan modification and leading a worry free and secure life. It is the easiest and safest way in which you can avoid foreclosure and make sure that your property remains under your possession.
With the help of loan modification, you would be able to strike a clear balance between your income and expenditure. Unlike short sales, you are not selling off your property to anyone and not creating a negative credit report. Before you can strike a bargain with your lender about your loan modification and its terms, it is better to talk to a mortgage attorney and look for options wherein your loan terms can be modified. You can also go to a mortgage modification expert and ask about all the ways in which you will be directly benefitted.
Loan Modification Requirements:
You would then have to talk to the lender and then submit an application for loan modification along with a few documents namely, a cover letter, a financial statement(current as well as projected), a hardship letter, tax returns, home valuation, hardship proof and you bank statements. The inclusion of these documents with your application letter is necessary if you want the loan modification request to be approved.
You would normally be asking for a reduction in the principal loan amount or the reduction in the rate of interest. You can also ask for a change in the type of interest i.e. from fixed to floating and also describe the way in which you would want the interest to be calculated. Additional options include the change in the loan repayment period. Generally, the period of loan repayment is made longer, which lessens the installments being paid by you. Another one of the options may include monthly capping of the interest rates. When this is done, you would only be paying a fixed sum each month, depending on your family income and your hardships.
Overall, we can say that this procedure is better than the other options. As it is completely legal and safe, you do not have to worry about falling into financial frauds. However, you must make sure that all the terms are formulated in the presence of an attorney, so that you are not tricked into higher repayments.