Home Loan Modification

We've all heard about Home loan modification programs so much over the last years. They have been around as long as home loans existed, but have received little attention until recently when the banking and mortgage industry collapsed. With the current economic situation banks are going all out to keep their customers in their homes. When these customers begin to have trouble, many banks are now offering loan modification as a preventative measure so that people can keep their homes. These programs are getting more and more attention in the media and you - as a consumer - want to be sure you understand how they work.

Often referred to as the poor man’s refinance opportunity, loan modifications do not change your actual loan, as in you aren’t “re-buying” your home with a new loan. Refinancing requires appraisals and all of the processes you have to go through when first buying a home. Your credit is re-examined and you have to go through a regular approval process as if you were starting form step one. Home loan modifications simply rewrite the conditions of your existing loan. They typically happen because the borrower can no longer meet the payments. Rather than call the loan and foreclose on the property, which might happen in a seller’s market, banks work with their customers to keep them in their homes.

You don't already have to be late with payments to get a loan modification. You simply need to state what your current and/or future hardships might be and how they will affect your ability to make your payments. You have a better chance of negotiating a good modification if you aren’t already stressed out about debt that you are building. You will also be more clear headed as you fill out your information and write your hardship letter.

Contrary to popular belief, home loan modifications do not hurt your credit rating. If you have become delinquent in making payments, THAT will hurt your score, but a loan modification itself will not hurt you credit. If anything, it will show initiative on your part to remain a good loan risk. Late payment history, debt avoidance and missed payment are all behaviors that affect credit poorly.

While the internet makes everything seem easy, you may want to enlist the services of a professional (or a Loan Modification Company ) when modifying your home loan. A financial counselor or attorney who has your best interest at heart will be a good advocate for you and your interests. They are also knowledgeable on the ins and outs of the loan modification process. This would be one of those times where you leave the dirty work to the professionals.

If you think a loan modification is what you need, contact your financial institution and ask for a counselor to help you out. Knowing as much about the process yourself will also be of great benefit as you begin the process. A loan modification could keep you home free financially speaking!!

Get your question answered: How does a loan modification work ?.

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