FAQs on Home Loan Modifications

If you feel that you will default in making regular monthly home loan payments, you can go for a home loan modification. It is an agreement between the home loan lender and the homeowner to modify the original terms of the loan and thereby help the homeowner to make affordable payments.

Here are some of the commonly asked questions on home loan modification:

1. What is a home loan modification?
It is a procedure through which you can extend the mortgage repayment time period. It also helps you in making payments at lower rates. Through home loan modification, homeowners can retain their homes even if they are facing financial instability. Both homeowners and the money lenders benefit from it because homeowners get a chance to pay the mortgage as per his convenience and the lender is assured that the homeowner will make the full payment.

2. How does loan modification help the homeowner?
Owing to the nationwide financial crisis, many American homeowners are finding it difficult to make mortgage payments. Loan modification will help in modifying the loan in such a way that the lender will allow the homeowner to pay lower mortgage rate by extending the repayment period by five years as surplus time.

3. How is different from refinancing?
Refinancing involves availing a new loan to pay your initial mortgage at a lower interest rate. People who have bad credit cannot benefit from refinancing as they will be denied loans. On the other hand, loan modification only modifies the existing loan by extending the repayment duration and reducing the monthly payments.

4. How can I qualify for a home loan modification?
In order to qualify for a modified loan, the owner of the home should occupy the home that you have purchased on loan. The date of the loan should be before January 1, 2009. The principal on the loan must be not exceed $729,750. While applying for the loan, you should provide the bank with a proof of current gross monthly income.

5. I have a bad credit score; will I be able to qualify for loan modification?
Mortgage providers perform credit check before modifying the loan. Hence, your credit score will to some extent affect your eligibility for loan modification. Mortgage providers will see if you are going through genuine financial problems such as job loss, reduction in salary, or any situation that is affect your monthly mortgage payment. If your problem is found to be genuine, they will surely assist in modifying your home loan after going through your home loan payment history.

6. How is loan modification going to help me save my home?
Do not consider it is an option to save your home. It is a way through which homeowners who are financially unstable can continue their mortgage payments. It can help you save some money which mainly depends on the new rates that is provided by your lender.

7. Whom should I approach to get a loan modification?
First of all, you need to talk to your financial advisor to help you decide on a rate that is best suitable for you. The next step you need to take is to talk to your lender and apply for a loan modification.