Do You Qualify For a Loan Modification?

Lenders and loan servicing companies in general, look for one thing when you submit a loan modification request. First, they look for a hardship that can be documented, but at the end of the day if they decide to grant your request for a loan modification all they really want to know is if you can afford the new payment(s). This is the big secret behind getting a loan modification approved.

There is an art to making loan modifications work. You must demonstrate that you cannot afford your previous mortgage payments while showing that you can afford the new payment structure. It sounds complicated. It is at first but you will rapidly learn key strategies for effectively processing loan modifications.

To understand what the lender or loan servicing company considers "qualified", you have to know how lenders calculate your income. The income you can use to qualify for a modification is different from income calculations used to qualify for traditional loans. The difference in the qualification guidelines is typically in your favor.

For a loan modification, you can qualify based on your documented total household income. You can count income from almost any source: Grandma’s SSI, income from child day care services, from a second job paid under the table, etc... as long as it can be proved. Proof must be in the form of bank statements, 1099’s or in some other documented form as outlined in the submission paperwork you will provide the lender. In addition, if only one of two spouses was on the original loan, the other spouse’s income can count so long as it can be documented. Once you calculate documented, monthly household income from all sources, you can present this to the lender as new qualifying income.

To calculate a qualifying monthly mortgage payment, use the benchmark fully amortizing 5.00% rate on whatever the new balance might be. Count payments in the rears if they are added back into the loan. WARNING: this is only for a general qualifying exercise. Do not expect this rate or this payment! If the payment at 5.00% is just too high, then you may not be an appropriate candidate for a modification. However, you can still request help with other services such as a deed in lieu of foreclosure, a short sale, or postponing as long as possible a notice of trustee’s sale in an effort to help you transition to more affordable housing.

Qualifying for loan modification is a fairly straight forward process. It can be challenging for the homeowner, as they are navigating a mine field. Utilizing loan modification professionals brings efficiency to the process, and peace of mind for the client,