Bare Basics of Home Loan Modification
The topic of loan modification is a well-understood one by experts, and a complete mystery to the homeowners that need it. If you are homeowner and considering home loan modification, here is an FAQ that may shed some light on a few aspects of loan modification that you were not aware of and can help you on your way to a new road of financial stability through mortgage modification:
1. What is home loan modification?
Basically, home loan modification is an adjustment to your mortgage that extends the time period of the mortgage, but lowers the rate you must pay monthly to stay in your home. Loan modification is the newest method to assist homeowners in keeping their homes in this time of extreme financial instability within the United States. Loan modification is essentially forming an agreement between a homeowner and a lending company to make sure that the mortgage is paid.
2. What can loan modification do for a homeowner?
America is in the middle of a nationwide financial crisis and more homeowners than ever are unable to keep up with the mortgage payments on their home. Loan modification adjusts the mortgage rate so that the homeowner pays less monthly for their mortgage, with the mortgage extended for five years to allow extra time to pay off the mortgage. Sometimes even the interest rate on mortgages is lowered in the loan modification process.
3. How is loan modification different from refinancing?
Refinancing is essentially getting a new loan to cover your initial mortgage to cut costs. Refinancing is not available to homeowners who have less than pristine credit. Loan modification is working directly with the lenders of your mortgage to have the monthly payments reduced and the duration extended. Loan modification is available to anybody who is in financial crisis and does not want to lose their home.
4. Will my credit score affect my eligibility for loan modification?
Your credit score affects everything, and that includes your eligibility for loan modification. However, having bad credit does not necessarily bar you from some sort of loan modification assistance. When loan modification firms attempt to assist you, they look at several variables to determine whether you are eligible or not. If you are in financial hardship from a job loss, income decrease, or any situation that affects your income, that is taken in consideration. Your mortgage payment history is also looked at when being considered for home loan modification. Bad credit is only one of the factors that affect whether you can get assistance, unlike with refinancing where it is the biggest factor in your eligibility.
5. Will loan modification really save my home?
Loan modification is not to be seen as a way to get out of responsibility and is not to “save your home”. It is not a get out of jail free card. Loan modification serves to help homeowners who simply cannot afford to pay their mortgages at their current rates. Loan modification is not going to save you anything but some money, and it is up to you to pay the new rates if you are approved for loan modification.
If you are interested in seeing if you are eligible for loan modification there are government-run programs and independent loan modification assistance firms that can help you get where you want to be with your mortgage payments. Hopefully this FAQ cleared up some basic questions that homeowners looking into loan modification may have had.
