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Modification of Mortgage - 3 Options for Avoiding Foreclosure
The loan modification process is particularly for Homeowners having difficulty making their loan repayments. Such homeowners will be able to go for a loan modification that will provide extended loan repayment terms up to 40 years on a reduced interest rate and also principle forgiveness-in rare cases. Borrowers who are behind on payment and are facing financial hardship will find this article interesting, as it will educate you about the various options and alternatives available to you to avoid foreclosure.
3 options to help avoid foreclosure
*Repayment Plan
*FHA Loan-Partial Claim
*Mortgage Modification
Repayment Plan: If you are struggling financially because of a temporary reduction in your monthly income or a temporary financial hardship because of increase in your medical bills or because of death in your family this option will help you come current on you loan repayments. This plan will allow you to make up the missed payments by paying a certain percentage of the past due amount each month in addition to your normal payment. In this way, you will be able to pay the missed payments and can avoid foreclosure.
FHA Loan-Partial Claim: issued by the FHA insurance fund to pay the default amount and bring your loan up-to-date. In this case, you have to sign a promissory note for the defaulted amount; however, no interest or payments are due on this loan until the house is sold or refinanced. The only condition is that your payments must be a minimum of 4 months in arrears but no more than 12 months behind.
Modification of Mortage: Borrowers who are struggling financially due to a reduction in income, death in family, medical expenditure or an increase in expenses, may qualify for this option; however, you have to produce and complete certain documentation in support of your request for a loan modification. The homeowner is required to submit an application to bank or a financial institution which includes certain documentation which will be reviewed by the bank before a workout option is recommended. You have to produce documents which will define your current financial situation as the bank needs to have a good understanding of that.
Below is the list of information required by the banks or financial institutions:
· Bank statements
· W2 Tax returns
· Financial statements
· Hardship letter describing the events which caused the financial difficulty
It is important that you complete all forms, fully and accurately so that the bank can assist you in obtaining the mortgage loan modification. When the lender has all the documents they require from you, the chances of approval increase. A successful process will help you to pay cheaper, more affordable and sustainable monthly installments.
If it is approved, homeowners may get one or more of the options below:
· Longer loan payment term up to 40 years
· Reduction in interest rates
· Principle forgiveness
The loan modification process will take some time. So don't wait until it is too late to ask your lender for a modification of your mortgage.
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