Loan Modification in 2009

Lenders policies are changing daily therefore, it is difficult to determine what qualifies a borrower for a loan modification, and the type of loan modification they will be offered. There are a number of different options a lender can offer such as reducing the monthly interest rate, extending the amortization period, or principal balance reduction.

However the later is rare. Being able to prove an economic hardship continues to be an important component in the loan modification qualification process. Divorce, the death of a spouse, job loss, and a decrease in working hours are all considered valid hardships. Being able to provide documentation of these loan modification hardships is necessary. In addition, banks want to see that borrowers are cutting bank on other soft expenses.

What are soft expenses? They are expenses that are adjustable such as food, utilities, cable, phone and miscellaneous items. Lenders are less inclined to do a loan modification for borrowers that are still spending excessively. Banks want to see that you will be able to afford monthly payments if they qualify you for a loan modification. Good faith money, also called earnest monies, is the money that you should have available to pay toward your loan once a modification has been approved. It can be quite tricky to demonstrate economic hardship and yet, still have good faith money. This is where the debt to income ratio comes into play. Ones income should suffice to pay the monthly mortgage payments, hard expenses and reduced soft expenses, while still having some disposable income. Your Basic Guide to Do-it-Yourself Loan Modification kit can assist you in gathering all the necessary documents, and putting together a loan modification package to present to your bank. It is difficult to go through this process alone and now you do not have to. Rely on this manual to guide you through the process and you will be successful.

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