Loan modification is an effective tool a homeowner can use if falling behind on a mortgage and encountering financial difficulties.
This method can be used to save a home from going into foreclosure.
The mortgage loan will be configured making it more affordable and fitting into the homeowner's budget.
This type of loan was reserved for those homeowners whose mortgage were delinquent due to loss of a job, divorce or illness, but today they are now available to those who are suffering from mortgages with adjustable rates increasing that have caused their mortgage to become unaffordable.
Loan modification will reduce the interest rate of the mortgage loan and even extend the length of the loan if necessary.
For a homeowner to be approved for loan modification, he needs to find out the guidelines for approval.
Each individual lender has its particular qualifications that each homeowner must meet to qualify.
Debt ratio is the most important guideline to meet.
This is the percentage of one's income that is spent on housing expenses every month.
Many lenders want this to be between 34% and 45% for someone to be an acceptable applicant.
The following are qualifications an applicant must meet to be approved for loan modification: 1.
One's current residence must be the mortgaged home.
2.
The mortgage must have been signed on or before January 1, 2009.
3.
Proof of income is required with tax returns and payment receipts.
4.
The mortgage must be lower than $729,500.
5.
The homeowner must submit a hardship letter convincing the lender of financial difficulties.
6.
If the entire debt of the household is more 55% of regular income, credit counseling must be completed.
Before a homeowner contacts a lender for approval of this loan, it is important to have all income documentation ready.
This will include paystubs, tax returns, mortgage documents and all debts.
The lender can then be contacted and the homeowner will be soon on the way to approval.