Home loan modifications seem like the only available option for many homeowners who are on the verge of foreclosure to stay in their homes. As an alternative backed by the Obama Administration, they just may be the only method for millions of people to save their homes.
Many homeowners are looking for home loan modifications, but aren't quite sure what they are. The most basic type of modification is easy to explain:
A lender or financial institution, usually the one the homeowner has the initial mortgage under, lowers the mortgage interest rate based on whether the homeowner is in financial hardship and their debt to credit ratio. The new interest rate is locked and the mortgage is extended for up to 40 years, with possible balloon payments at the end.
There are different types of home loan modifications - some even wipe away part of the principle - but most of them entail the above. It's worth noting that each lender has a modification program, which is a set interest rate that they give or a percentage of principle that is wiped away, but deep negotiations can undermine the program.
Most homeowners should seriously consider working with a loan modification company or attorney to approach their lender with a modification proposal. Getting help from a modification professional can skyrocket anyone's chances for approval - so much so in fact, that not approaching a lender through a professional can be foolish.
The downside to seeking out a home loan modification professional is that there are several scam companies out there under the guise of legitimate professionals. Spotting these scams is especially though, so it's recommended for any person seeking a professional to check with the Better Business Bureau and asking several questions before deciding on a specific service.
It's not impossible to get modification without a company, and many homeowners have already done so. However, anyone considering going at it on their own needs to be sure to fill out the application perfectly. Any mistakes on the application can disqualify a homeowner, as can a poorly-written hardship letter.
It can take up to eight weeks to have home loan modifications approved by a lender. Stopping payments while waiting for the approval is not recommended, as it can show a lender unwillingness to work with them.
Whether alone or with a profession, getting a lender to approve home loan modifications is going to take time and perseverance.
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