5 Tips About Loan Modifications You Can’t Afford To Miss
Situations in life are always going to change and there is no way to prevent it, and most people are not prepared to handle the unexpected. Someone in the family may get into a serious accident, or the major financial provider in the household could get laid off. Keeping up with mortgage payments might seem impossible if finances suddenly decrease. There is always the option of making a short sale or foreclosure, but a loan modification could be the solution to actually keeping the home. This agreement alters loan terms so that they are easier to maintain with the restrictions of a tighter budget. It is easy to get confused with all of the new information being introduced, so we have comprised a list of smart tips that anyone entering a modification should know.
No one can guarantee the outcome of a loan modification. However, possible outcomes may include the following:
- Reduce Interest Rates
- Change Adjustable Interest Rates to Fixed Interest Rates
- Reduce Cap of Adjustable Interest Rates or Stop Upward Adjustment
- Reduction of Principal Balance
- Lower Monthly Payments
- Extend Terms of Existing Mortgage Loans
- Temporary Interest-Only Payment Plans
- Avoid Foreclosure
- Arrange for Delinquent Payment Amounts to be Reduced or Eliminated and Added to The End of The Loan or a Longer Loan Period
You May Not Have to Be Behind to Qualify for a Loan Modification
There is no need to fall behind on mortgage payments to take action unless it is required by the specific financial institution. It is smart to take the initiative to reach out to the lender at the first indication that the next payment will be missed. Imminent default has to be proven as a change in income, sudden unemployment, medical expenses, or other significant hardships.
Loan Modification is Not Required By Law
Do not get too comfortable with the idea of relying on a loan modification to save the home from foreclosure. Lenders are not required by law to agree to any modification plan unless it is of their own choosing. There may be financial incentives offered by the government to accept a modification, but it truly falls to the decision of the lender.
Loan Modifications May Reduce the Balance
It is possible in some scenarios that the balance of the loan could be reduced by the lender. It’s pretty uncommon, but reducing the principal is one type of adjustment that can be made in the new agreement.
Non-Fannie Mae and Freddie Mac Loans Are Be Eligible For Modification
Anyone that holds a conventional mortgage may be granted a modification from their lender. Moving forward with the foreclosure process has major disadvantages for the lender, and they typically want to avoid it whenever possible.
During the Application Process, Foreclosure Cannot Proceed
In early 2014, laws were passed to protect borrowers from foreclosure while in the process of negotiating new loan terms. It’s still a good idea to review any paperwork with an attorney, but it is valuable to know that proceeding with foreclosure in this circumstance is illegal.
We can explain these tips and provide additional information as needed if you provide your information through the contact form.