Loan modification is a better choice in order to avoid the foreclosure sale when you are falling behind on your payments. The lender must agree in order to make the modification. When the lender accepts your application for a loan modification, the terms, like interest rate and loan duration are modified. In order to qualify for a loan modification, some key points should be kept in mind.
How to Qualify for A Loan Modification?
Most of the modification programs require you to show that you are going to fall behind on the payments. You should never go into default to qualify, as it can have a negative effect. Here are some loan modification tips for you.
Qualify When You Are Up-to-date On Payments
It is a good choice to apply before rather than waiting to be in the defaulter’s list. The following things are needed in order to qualify.
- Your primary residence must be your own home
- You are facing a financial hardship
- You have the income source using which you will make the payments under the modified terms
Applying for a loan modification using the primary residence has a higher chance of being approved. Lenders generally do not feel comfortable with the investment properties. So while applying for a loan modification, you must use your primary residence in order to have a high chance of qualifying.
Financial hardship may arise because of job loss or medical situations due to which the borrower is unable to repay the loan amount. It is understandable that this type of events can happen, but you should make it clear how you are going make the payment once the loan is modified. You should include the hardship letter in your application file for the modification. You can also send the hardship letter to the lender in advance to give him an idea about your financial condition.
One of the main factors lenders take into account while reviewing the modification application is the debt-to-income ratio. This is the ratio of the total monthly income to the total mortgage payment. This ratio should be between 36 percent and 45 percent in order to have high chances of qualifying.
Complete the Application
Complete your loan modification application and stay in touch with the lender. Take the advice of a loan modification expert if you think it is necessary. You have to submit some documents, like payment stubs, hardship letter and any other document the lender wants. To have a high chance of qualification for loan modification, make sure that all the documents are properly completed and updated. Sometimes, you may be asked to submit the documents again. But don’t feel frustrated, be calm and always remain in contact with the lender. If you follow all these necessary steps, you will qualify for the modification easily.