6 Tips for Getting a Loan Modification

Remember the day you made settlement on your house? The excitement of walking through your front door for the first time? Hanging your beloved artwork in just the right spots, shopping for the perfect TV to fit the space, enjoying life in your new home.

If financial troubles have turned what used to be your little slice of heaven into a burden of anxiety and you’re struggling to make your mortgage payments, a loan modification may be the answer.

Through a loan modification, the lender agrees to permanently restructure one or more terms of the existing loan, resulting in a more affordable monthly payment. The goal is to prevent foreclosure, which can be devastating for the borrower and costly for the creditor.

A loan modification may involve reducing the interest rate, increasing the length of the loan, converting to a different type of loan (for example from variable to fixed-rate), or a combination of these options.

A loan modification is not a forbearance, which would allow you skip or make partial payments for a little while. It’s not refinancing, in which you’d close out the old loan and get a new one. Rather, it’s a way to adjust your current loan to provide long-term relief for your financial troubles.

Taking this step may mean that you end up paying more in interest and waiting longer until your home is fully paid off. But if you want to save your home, here are six things to consider to help you successfully navigate the loan modification process.

  1. Make Sure You’re Eligible

Not every borrower will qualify for a loan modification. Typically, you’ll need to prove that you’re in a significant state of financial crisis or hardship, perhaps caused by job loss, divorce, or a serious physical or mental health situation.

  1. Talk to Your Lender

Owning up to financial difficulties is not easy, but it’s the first step in digging out of the hole. Reach out to your loan provider right away. Check out your latest loan statement or the company’s online contact information for departments such as “loss mitigation.”

And if you’re dealing with a financial hardship and the phone starts ringing – answer it. It could be your lender proactively trying to help.

Be sure to clearly describe your situation, ask about options, and don’t be afraid to propose your own ideas – it shows you’re interested in finding a solution.

  1. Let the Paperwork Begin

If the representative agrees that you’re a candidate for a loan modification, complete the application paperwork in a timely manner.

You’ll need to accurately verify your income, expenses, loan payment history, and other financial circumstances to demonstrate your inability to meet the current loan commitment. You may need documents such as tax returns, bank statements, pay stubs or contracting checks, and/or a hardship letter detailing the reasons you are requesting new loan terms.

  1. Keep Your Records – and Keep Your Cool

Know that this can be a time-consuming process; you’ll be dealing with multiple representatives and a multitude of forms.

Remember that we’re all human – mistakes happen. Documents can get lost. People can interpret things incorrectly. Copy and date everything you submit. Put your name, contact information, and loan number on each page. Also keep records of anything your lender sends you. Whatever happens, be polite; people are more likely to want to help someone who’s being nice to them, so in this case, kindness really does matter.

  1. Look to the Long-Term

If you and the lender come to an agreement over your loan modification – congratulations! Make sure your expectations are realistic. Understand that the proposal may not be as favorable as you had hoped. Before you finalize anything, make sure it’s an arrangement that you are willing and able to keep.

Know that your credit score will be affected, making it harder for you to obtain other loans until your score goes back up.

  1. Don’t Give Up

If at first you don’t succeed, try, try again. Determine why the application was rejected and what you can do to get the resolution you want.

You may want to work with legal expert to help you understand your options to challenge the decision, make a counteroffer, or pursue a different solution entirely.

If you want to appeal, if you get stuck on the paperwork, if you believe your rights aren’t being upheld, or if you don’t even know where to begin, we can help. Contact Veitengruber Law, and we’ll be glad to work with you to tailor and pursue a comprehensive debt-relief plan to help you get your loan modification and financial situation back on track – all while you stay in the home you love.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: