Stop Home Foreclosure

Modifying a mortgage loan has become much easier since the implementation of the Obama administration’s loan modification plan. This plan provides incentives to lenders to change the terms of an existing loan to make payments on Columbus houses more affordable to homeowners. In the past, getting a mortgage modification was far more difficult, since lenders had to bear certain costs of the process.

How to determine if you qualify

In order for you to qualify for the loan modification there are certain criteria that you must meet. Firstly, qualifying Columbus houses must be your main residence and you need to have bought it prior to 2009. Depending on the area in which you live the loan you apply for cannot be more than $730,000. If the house is located in a more high cost area then the loan limit might be somewhat higher than the aforementioned amount.

You need to bear in mind that the modification is not available on second mortgages – only on the first one. Of your monthly income at least 31% must go toward the mortgage or you will not qualify for the modification. And, as unpleasant as it may be, you will be required to demonstrate that you are currently experiencing financial difficulties that are creating problems when your mortgage payments are due. It does not matter if these problems have arisen because of a job loss or some other reason. The issue is that you will need to share this info.

The process that follows qualification

The first step in the process is to contact your lender. Under the Obama plan, a lender is not required to modify your loan, but participating lenders are more likely to work with you because of the financial incentives the plan offers.

Next, you’ll need to gather relevant documents. This includes evidence of your pre-tax monthly household income, your most recently filed tax return, information on savings and assets if applicable, and mortgage and loan statements for your first and second mortgages or home equity line of credit. You’ll also need to create a detailed budget that lists your monthly expenses, including credit card payments and installments loans, like student and car loans.

Once you’ve gathered this information, you will go through the final process with your lender of negotiating the terms and completing the necessary paperwork.

Modification vs. Refinancing

So why bother to modify your loan instead of pursuing a refinance? The two main reasons are cost, and the ability to qualify. In most cases, you’ll need excellent credit in order to qualify for a refinance in the current credit climate. If you’re in danger of falling behind on your mortgage, chances are you have less than spotless credit. There are also no fees associated with a mortgage modification under the Obama plan, and if you are in arrears, late fees and penalties can be waived. With a refinance, you will be responsible for closing costs and other fees.

Modification is the best option if you are falling behind on your payments, or if you could not afford to stay in your home with a new loan at conventional rates. On the other hand, refinancing is a better option if you have equity in your home and are looking for a better interest rate, even if you don’t qualify for Obama’s modification plan. Refinancing is also the only way to cash out if you want to tap into your home’s equity.

You might opt for a professional, such as a lawyer or service provider, to do the negotiation regarding the modification you seek. However, you do it yourself and save between eight hundred to two thousand dollars, which is the standard rate. Thanks to the incentives the plan offers to lenders it is easier for you to do the negotiation yourself. If you plan the case and provide proper assurance that you will make the monthly installments everything should be fine and in place.