If you are facing the possibility of foreclosure, you might want to consider approaching your mortgage lender in order to work out a mortgage modification. With the help of a mortgage modification, you change the terms, the interest rate or the principal balance in order to make the loan more affordable. Before you pursue a mortgage modification, however, it is essential to learn more about the process and how to qualify for this type of assistance.
Exploring Mortgage Modification Options
When it comes to obtaining a mortgage modification, there are several options to pursue. One option is to get the interest rate reduced, which will help reduce your monthly payments. Another option is to change the terms of the agreement, such as changing the loan from one with an adjustable rate to a fixed rate, which will ensure your monthly payment remains the same each month. As such, you will be better able to budget your monthly expenses. Yet another option is to get the principal balance reduced so your payments will be more affordable.
Understanding the Lenders Point of View
While it might seem strange that a mortgage lender would be willing to make these types of modifications, the reality is that lenders realize that it is sometimes better to work out new terms with a borrower than it is to risk foreclosure. Since the average foreclosure costs the lender anywhere from 35 to 50 percent the property’s value. As such, renegotiating the terms may be the best financial move for the lender to make.
Qualifying for a Mortgage Modification
To qualify for a mortgage modification, you will need to gather together a great deal of paperwork. Some of the information your lender will likely require includes:
• Monthly mortgage statement
• Statements from any second mortgages or home equity lines of credit that you might have
• Balances and minimum monthly payments due for credit cards, car loans, student loans and any other debts you might have
• A copy of your most recent income tax return
• Statements on any savings and other assets you might have
• Pay stubs and any other proof of monthly gross income
By having all of the proper paperwork in place and by demonstrating a genuine desire to pay off your mortgage loan, your lender just might be willing to work with you to create a mortgage modification that works for you.
