Loan Modification - How To Qualify
- Author Carla Ghosn
- Published August 4, 2011
- Word count 675
A loan modification refers to the process by which your bank grants you a permanent or temporary adjustment to the conditions and terms of your mortgage. These adjustments are aimed at making your payments more affordable in accordance with the regulations of your financial situation, and they can involve longer loan term periods, the reduction of the principal, or the granting of a lower interest rate. These measures can prove instrumental in avoiding foreclosure on your home. In order to apply for this process, you must find out if you qualify for a loan modification.
You need to determine if you meet the required qualifications relevant to a modification. Lenders have their own qualification guidelines. Whilst similar, these guidelines can vary from lender to lender.
The following are guidelines that banks use in evaluating the eligibility of your loan for modification:
Front-end debt-to-income ratio
The front-end debt-to-income ratio is utilized by lenders in determining the amount of your gross income (not net income) that is directed toward your house payment on a monthly basis. They combine the costs of housing expenses, interest, taxes, and other relevant and important factors in determining your debt ratio. The lender calculates the front-end debt-to-income ratio before the modification process is started, along with what it would be after the application has been processed. Before the modification, this ratio needs to be above 31% in order for you to be eligible. As a result of the modification, the ratio needs to be lowered as follows:
-
For private loan modification programs, an acceptable debt-to-income ratio is typically between 31% and 42%.
-
For HAMP loan modifications, the guideline is to lower the debt-to-income ratio between 31% to 38%.
It is important for homeowners to understand that this is an important criteria for approval.
Modification agreement
This agreement provides homeowners with a lower monthly mortgage payment which helps reduce their debt-to-income ratio to an acceptable level, as outlined above. Before you are granted a permanent modification, you will be given a three-month trial loan modification (a.k.a trial payment period, or TPP). During this period, it is critical that you make your payment on time or you won't be offered a permanent loan modification. You may need to fine-tune your budget and eliminate unnecessary expenses in order to afford your new mortgage payment.
Although you should be well aware of your debts and expenses, you should not need to become a financial analyst in order to understand how all these ratios work together. It's advisable to seek some expert help in trying to make sense of your budget before and after the modification process.
Do your research
In order to qualify for a loan modification you need to educate yourself about the process. Initially, the process can be intimidating to homeowners, but with some careful research you will discover it to be less daunting than you might expect. Educate yourself regarding the lending requirements of your bank while thoroughly completing all the necessary forms. This will increase your chances of approval.
Seeking outside help while working directly with your lenders
You may choose to work with your bank directly. However, informing yourself about the process may help you avoid unnecessary difficulties along the way. Additionally, if you want to obtain some assistance, secure help that is inexpensive and conflict-free.
Presenting professionally prepared paperwork
Your application package and the associated paperwork must be acceptable to the bank. Ensure that you have filled out all the required forms. Don't forget to include a letter that describes your financial difficulties in detail. Use language that is grammatically correct in order to convey a respectful and professional attitude.
Conclusion
Take the necessary time to be properly prepared before you begin the loan modification process. After all, this is your precious home that you are trying to save. You will discover that once you become familiar with the ins and outs of this process, you will be able to determine whether or not this program is suited to you.
For more information on loan modification programs, please visit http://www.mycaal.com
Carla Ghosn, CEO and Founder of Caal (mycaal.com).
Passionate entrepreneur with the goal to help American homeowners save their homes. Visit Caal loan modification software to help you get pre-qualified and prepare your complete loan modification application online. Read more on Caal Blog.
Article source: https://articlebiz.comRate article
Article comments
There are no posted comments.
Related articles
- Guaranteed Auto Financing
- Elevate Your Business with Top-Quality Printing Equipment from Finance@work Pty Ltd
- BNPL vs Traditional Lending: Which Is the Better Option for Today’s Consumers?
- Can Getting a Loan Affect my Personal Credit Score?
- Personalized Loans 5 Things you Should Consider Before Applying
- Best Credit Card for Cash Back on Gas: Fuel Your Savings
- Mwananchi Credit Highlights The importance of Teaching Financial Literacy In Schools
- Porchlio's Rent Affordability Calculator: Your Key to Smart Renting
- What is SMB Funding?
- Cash USA | Quick & Easy Loans
- How Can a Private Loan Help Your Cash Flow Situation
- Business Line of Credit: A Lifeline of Your Financial Needs!
- Unsecured Small Business Loans in Australia
- Working Capital Loans: Everything you Need to Know
- Small Business Cash Advance Loans - Fast and Easy
- Things Not to Do When Building Business Credit
- Why Small Business Loans Do not Get Approved
- How to File Great West Life Benefit insurance Claim
- My encounter with the heartless corporate America @ChaseBank
- Are low doc home loans still available in Australia?
- Think Due Diligence Before Acknowledging That Loan Offer
- Tie Up Your Financial Loose Ends! The Importance of Managing High-Interest Loans
- Understanding cash flow vs. asset-based business lending
- Debt Consolidation Loan or Debt Counselling in South Africa
- Credit cards with bad credit wired to a prepaid debit card
- Insurance Financial Producers Articles - A Superstar Success Story Cannot Teach Me Anything
- Three Quick Tips From the Canada Revenue Agency on Tax Filing
- How Crypto Loans Work
- 4 Reasons why it is Beneficial to make a Down Payment for your Car
- Is the Process of Buying a Car Worth your Time?