The loan modification plot was instituted by President Barak Obama and his administration. By providing lenders with hard to resist incentives they then agree to alter, or modify the terms of a person’s current loan. For homeowners this is fantastic news, because it makes it simpler to meet the installments each month. Because some of the cost involved used to be for the lender to pay it was nearly impossible to have mortgages on Columbus houses modified prior to the plot being implemented.
Do You Qualify?
In order to qualify for Obama‘s loan modification program, the home must be your primary residence, and you must have bought your home before January 1, 2009. The Obama plot does not apply to jumbo loans, which in most cases means your loan amount can’t exceed $729,750; but, the allowable limit may be higher in high-cost housing areas.
You need to bear in mind that the modification is not available on second mortgages – only on the first one. Of your monthly income at least 31% must go toward the mortgage or you will not qualify for the modification. And, as unpleasant as it may be, you will be required to demonstrate that you are currently experiencing financial difficulties that are making problems when your mortgage payments are due. It does not matter if these problems have arisen because of a job loss or some other reason. The issue is that you will need to share this info.
The process that follows qualification
The first step in the process is to contact your lender. Under the Obama plot, a lender is not required to modify your loan, but participating lenders are more likely to work with you because of the financial incentives the plot offers.
The next thing that you need to do is to provide proof of your income before tax. Your last tax return that you filed will also be needed. You will also have to provide any info regarding any assets or savings that you might have. Statements depicting your first, and if necessary, second mortgage payments and/or your home equity line of credit will be needed so ensure that you are prepared. Another thing you should take the time to do is draw up a budget that shows clearly what your out of pocket expenses are each month. It also needs to include the amounts that you pay toward your credit card and any loans.
Once you have contacted the lender, requested the modification and made the required info available, you can then proceed to the final part of the process which is to negotiate the terms of the loan with the lender.
Why modification instead refinancing is the better choice
When you refinance your mortgage all the closing costs and other fees become your responsibility. But, when it comes to the Obama plot there are no fees and even if you are late with your installments the late fees, or interest, can be waived. Unless your credit record is impeccable, it is highly unlikely that you will be granted refinance, because of the present state of the credit climate. So, cost and the ability to qualify are two of the main reasons why you should investigate the option of loan modification.
If you are late with payments, or you are not able to afford remaining in your home because of the usual costs when taking out a loan, then loan modification is just what you need. This is not to say that refinance is never a viable option, because it is. For one thing, you are able to gain access to the cash in your home equity through refinancing. Also, if you have equity in the home and you would like a better interest rate, this can be achieved through refinancing. And what is more, you can apply for the improved rates even if you do not qualify for the loan modification plot.
If you want to save between eight hundred and two thousand dollars then you will need to negotiate the modification instead of having a service provider or lawyer do it on your behalf. It is simple for you to do it because of the incentives available to lenders. As long as you can offer relevant assurance of timely payments each month you should not encounter any problems.