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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 to qualify for Obama’s loan modification program, the home must be your primary residence, and you must have purchased your home before January 1, 2009. The Obama plan does not apply to jumbo loans, which in most cases means your loan amount can’t exceed $729,750; however, the allowable limit may be higher in high-cost housing areas.

Your first mortgage, including principal, interest, taxes, and insurance, must exceed 31% of your gross monthly income, and the program applies only to a first mortgage, not to any second mortgages or home equity lines of credit. Finally, you must be experiencing some type of financial hardship that makes it difficult for your to pay your mortgage. Common causes of financial hardship are job loss, a reduction in hours, illness, and divorce or separation.

After qualification comes the process

The first thing you need to do is to get in contact with the lender. Once you have done so, you then need to request the modification plan. Some lenders who are not part of the Obama plan will probably refuse. Those who are, and there are many, will agree to the plan.

Your next step is to get all the necessary paperwork in order. You will need to be able to provide evidence of your monthly income before tax,k the last tax return that you filed, if you have savings and/or assets then you are required to provide relevant info about them. You will also need to provide statements for the mortgage and loan and this includes your second mortgage if you have one, or else the home equity line of credit. To help make the process easier draw up a budget. Make sure that your monthly expenses, which includes your credit card and loan installments, whether it be a student loan, or something else.

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

When you refinance your mortgage all the closing costs and other fees become your responsibility. However, when it comes to the Obama plan there are no fees and even if you are late with your installments the late fees, or interest, can be waived. Unless your credit record is impeccable, it is highly unlikely that you will be granted refinance, because of the present state of the credit climate. So, cost and the ability to qualify are two of the main reasons why you should investigate the option of loan modification.

If you are late with payments, or you are not able to afford remaining in your home because of the usual costs when taking out a loan, then loan modification is just what you need. This is not to say that refinance is never a viable option, because it is. For one thing, you are able to gain access to the cash in your home equity through refinancing. Also, if you have equity in the home and you would like a better interest rate, this can be achieved through refinancing. And what is more, you can apply for the improved rates even if you do not qualify for the loan modification plan.

Doing your own loan modification is a simple process, and there is no need to pay the typical fees of $800 to $2,000 to hire a lawyer or service provider to negotiate the modification on your behalf. The Obama plan provides enough incentive to lenders that you can negotiate your own modification, provided you are well prepared and can make a good case that you’ll be able to pay your modified monthly payment.

Because of the recent foreclosure boom, loan modification is a hot subject nowadays. A loan modification comes down to asking the lender to alter the terms of your mortgage for good. The change of terms oftentimes comes down to lowering interest rates. Also, extending the time of the loan is frequently done to keep the damage for the bank to a minimum.

The magnified demand for loan modification has not been overlooked by con men throughout the country. Scammers will try to get an upfront payment from you, promising that they can help you out. These scams can damage your prospects of getting a loan modification and lose you a lot of money in the process.

Most of the times, when you apply for loan modification, you want fast results. Some companies will guarantee you certain results with their service. Because the loan modification is not in charge of the decision, they can’t guarantee anything about the results.

Don’t believe the hype of getting your mortgage loan modification approved within a week or two weeks. It usually takes lenders 30 days minimum to consider a loan modification application. The fraudulent loan modification companies will promise anything, because they know they will never have to make good on their promises. They don’t care about anything but the upfront payments.

Do your research and find a reputable company when trying to do loan modification. Do not make the error of doing business with the very first company you bump into. These days, con artists are around everywhere and it takes some time to find the right individual to help you out with this.

It’s possible to handle your mortgage loan modification process yourself. If you decide to take on this job, it’s important to know what to do. Even more important is knowing what NOT to do! In this article, we’ll take a look at a few mistakes to avoid when turning in your mortgage loan modification application.

Mistake: Talking with the wrong person. If you get called at home by someone from the collections department, don’t start talking to them about mortgage loan modification. Then can not and will not help you. They may say that they will help you if you pay up, but in reality they can’t help you. Speak with the correct department at your lender’s office instead.

Mistake: Not taking the time to study the mortgage loan modification process. If you don’t take the time to do a little preparation before turning in your application, you may as well save yourself the hassle. Without preparation, there is an enormous chance your proposal will be denied.

Mistake: Not being completely truthful on your application form. This will get you in trouble. Many people fail to realize that a lender WILL check up on the facts provided on a mortgage loan modification application. If you get caught, you will immediately lose all chances of getting your mortgage loan modification accepted.

Mistake: Paying a big upfront fee to your mortgage loan modification company without checking their credentials. Because of the rise of foreclosures these days, there are a lot of mortgage loan modification companies rushing into the market. Some of these companies are not very qualified to handle your mortgage loan modification. You need to make sure that you’re dealing with a qualified, reputable company before paying them a dime. Mortgage loan modification should get you out of financial hardship, not deeper in the hole.

Mistake: Not reading up on the approval criteria of your lender. If you fail to study the approval criteria for a loan modification proposal, you will almost surely get denied. Most mortgage loan modifications get denied because of the fact that the applicant has not read up on what should be included in his or her modification proposal.

Your application will look good to a lender if you don’t make the mistakes we’ve outlined in this article. The final decision is up to the lender, but taking the time to do your mortgage loan modification right greatly increases your chances of being accepted.