What Is The Loan Modification Process?

You have heard about the new government loan modification programs but are confused by the process. It can seem overwhelming and complicated. Saving your home is certainly worth finding out how the loan modification process works and if it is right for you.

President Obama's Home Stimulus Plan has already saved millions of homeowners from foreclosure. The plan is working for others and can work for you! Whether are you delinquent or thinking you may be delinquent soon, it's time to act! Doing nothing will result in foreclosure, it really is that simple! So what is involved in the loan modification process?

1. Contact your lender. You will need to find out what specific requirements your lender has in order for you to qualify. (Do not share any financial information upon this first contact. You only need to ask for an application and clarification of their requirements.)

2. Hardship Letter. You will be required to create a hardship letter. This is simply a letter that details your current or upcoming situation. Some financial hardships that DO qualify include: recent or upcoming job loss, death in the family, divorce, having recently served in the military, significant medical expenses, and severe reduction of salary. These are the typical hardships that have been approved. You will need to convey to the lender how dire your situation is, or soon will be. This hardship letter is a big part of the approval process, so take your time and make it compelling.

3. Give the Financial Facts. This will require that you create a budget. This should clearly indicate why you cannot afford your current mortgage payment. It should also show that your total monthly mortgage payment (including taxes, insurance and homeowner dues) is at least 31% of your gross monthly income.

4. Create a New Budget. This second budget should show the lender that you CAN afford a new modified mortgage payment. You may need to cut out some of the previous expenses such as eating out, or movie night etc. You will also need to indicate that you will have some disposable income after meeting the new modified payment so the lender can see that you truly are going to be able to make the new payment.

5. REVIEW! You will not a chance to change any information once you submit your documents to the lender. Therefore it is imperative that you review your application carefully! Make sure you have every document the lender requires and review them a few times for accuracy and completeness. This is crucial! It is amazing how many homeowners have been denied simply because they did not either have all of the required documentation or filled out the paperwork incorrectly! Take your time and do it right, this is your only chance to get it right!

Now you know what is involved in the loan modification process. It is complicated and a very stressful time in your life.