A loan modification means you are re-structuring the current loan’s term, interest rate, and/or payments. At times, a portion of your principal balance may even be forgiven. Loan modification is sometimes referred to as a mortgage modification, loan restructuring, or a workout plan. The modifications are designed to give you the chance to stay in your home and avoid foreclosure.
How do I apply?
The first step is to call your lender. Ask to talk with someone about a loan modification. Keep detailed notes of exactly who you talk to during each phone call. Use a folder or binder and keep copies of everything you receive from the bank or servicer. Gather all the documents the lender asks for and keep records of your expenses. Be sure to put your request in writing after the initial phone call.
Who can qualify?
Qualified applicants are homeowners that will be able to show adequate income to cover the newly adjusted monthly payments. Inconsistent income or very low income could mean your request for modification may be denied. General guidelines for payment amount should be less than or equal to 30% of your monthly income.
What can I expect?
Loan modification is not difficult, however, it may be time consuming and tedious. Be persistent with your mortgage lender. The process could take several months to complete. Once the final paperwork is filed, you can expect to be put on a trial period for a few months. After the trial period is over, the modification will become permanent. During the trial period you cannot sell your home.