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4 Tips That Guarantee A Successful Loan Modification

Author : Willie Stone




As a result of four solid years of modifying home loans for our clients along with our own loans we have sure learned a lot. Even though there isn't any guarantees that your particular bank is going to agree your mortgage modification application, we have identified a number of approaches that do work regularly no matter what bank you happen to be dealing with.

1. The Hardship Letter: Your loan provider has to see clearly that you are having a hardship. Provide them with a 1 page explanation of your hardship along with exactly why it would help if your current payment and/mortgage balance ended up being lowered. A hardship needs to be a situation that is temporary such as a loss of a job, one time expense, or perhaps mortgage rate increase.

2. Debt to Income Ratio: demonstrate to your lender that the new lower payment on your mortgage loan will cause a 31% or less of your gross earnings. If your income is $5,000 per month, then the new loan payment you would ask for is $1,550 ($5,000 x 31%). Next, compute just how much 90% of the gross earnings is ($4,500 in the above example) and also take away the sum you came up with for the 31%. In the above example this will result in $2,950. This is how much you've got still left to cover other monthly expenses, which leaves you with 10% remaining. The 31% is the mortgage debt to income ratio and the 90% is the total debt to income ratio. Although this is not the hard and fast rule for every banking institutions, most use something similar, so you must ask them so you can make sure you fit into those requirements.

3. Value vs. Mortgage: You want to show your bank that they should give you a mortgage loan modification as an alternative to foreclosing on your home. By showing them that the true value will be less or equal to your current loan with them it gives them a reason to modify your loan. Using an online service such as Zillow you are able to pull up comparable houses within your area to verify the value of your home. Print these comparables as backup and send all of them along with your initial loan mod package. The bank is certain to get their own appraisal however you need to have a definite idea of your true value, especially when trying to discuss a principal reduction.

4. Determination and Followup: Generating weekly calls and repeating oneself should become part of your schedule when trying to obtain a loan modification. It is not unordinary to provide the same documents to several people at the same bank repeatedly before they receive it. For this reason it is advisable to not merely be persistent but organized. When you're in the process of modifying your loan it will change hands repeatedly at the lender and every department may request new information. Provide that information on time and track every phone call, fax, and conversation you have with the bank. You will need this should the bank not get something you've sent or accuse you of not supplying whatever they requested and declining the application.

Above all never give up!


Author's Resource Box

For FREE hardship letters that you need to get your a loan modification approved the first time click here: Loan Modification

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Submitted : 2010-10-01    Word Count : 870    Times Viewed: 288