Choosing a loan modification isn’t a decision you make overnight. Sure, it can be your ticket to a better mortgage, but it’s not a surefire way to solve your money problems. Like any other transaction, it has its challenges, and it suits some people better than others. If you’re not the right candidate, even the best loan modification attorney can’t guarantee the results you want.
Remember, loan modification is as much a commitment as it is a solution. If you’re considering a loan modification, here are some things you should ask yourself before making any decisions.
1. Do I qualify?
Each lender has its own policies, but the general requirement is that you have a job and be able to prove your financial hardship. This tells your lender two things: first, that falling behind wasn’t entirely your fault, and second, that modifying your loan can really help you back on your feet. If you’re still unstable or have no reason to request mortgage assistance, your loan modification firm won’t be able to help much.
2. How far behind am I?
It’s important to build a strong case to persuade your lender, but there are limits to how far behind you can be. It’s one thing to miss a few payments because you lost your job, but it’s another to deliberately miss half a year because of bad spending habits. As your debt accumulates, your lender perceives you as a high-risk borrower and may be less willing to work with you.
3. Can I afford it?
Depending on your situation, a loan modification can cost you anywhere from $2,000 to $5,000. But it’s not just a matter of having that much money in the bank. If you’re in a really tight fix and it’s the last of your funds, you may want to wait a bit so you’re not left with nothing in case your bank rejects your application. Your loan modification attorney can help you figure out a budget so you can plan it out better.
4. How much equity do I have?
Your equity value is probably the biggest factor affecting your lender’s decision. If you have enough equity to cover foreclosure expenses and deferred interest, foreclosure may actually be cheaper for your bank. However, equity is determined by the value of your property, which your lender can easily overestimate. Do some research beforehand to see how much your home is really worth, so you can face your lender with hard facts.
5. Can I stay on track?
A loan modification won’t free you of all responsibilities; it only allows you to meet them more comfortably. Once it’s granted, it’s no longer your attorney’s job to keep you on track. Make sure you have enough money saved up to cover initial payments when the mortgage reinstates, as well as an emergency fund. If something comes up and you fall behind again, the whole loan modification process will have been useless.
Loss Mitigation & Mortgage Loan Modification Attorney Blog 