Loan Modifications

Ok so everyone is talking about Short Sales and Loan Modifications nowadays. There are some things you need to look out for when looking for a company to handle your loan modification. The standard process of modifying a Home Loan either to adjust the interest rate, the Principal Loan Amount and or the terms can be tricky for the average person.

There are numerous companies advertising to modify loans and most actually never do anything at all except take a large upfront fee from the homeowner for services never performed. To me this is for the most part fraud because these companies do not guarantee that they will actually modify the loan itself.

Who is eligible for the loan modification:

Not everyone is going to be eligible to modify there home loan under the banks guidelines based on plenty of factors like your income, debt to income ratio, and the actual value of the home itself which has also been the biggest factor in refinancing over the last 2 years as home prices have falling year after year.

  • Most banks will modify the loan balance to somewhere around 90% of the Actual Home Value in todays market regardless of what the original balance is.
  • Remember The Bank does not want to take the house back in a Foreclosure
  • The Bank wants to work the homeowner as long as the Homeowner can repay the new loan
  • Each back has its own criteria that will use when working with potential homeowners when applying for a Loan Modification.  What will work with one bank may not work with another bank.
  • FHA Loans state that you might have to share future profits from the sell of your home if your home loan is modified with FHA.
  • Live in the home as your primary residence
  • loan must have been originated prior to January 1, 2009
  • Loan amount must be less than $729,750
  • Only applicable to first trust deeds-second loans not allowed (can be negotiated separately)
  • Your current house payment must equal greater than 31% of your gross (before taxes) monthly income (payment includes property taxes, insurance and homeowners dues)

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