Do You Qualify For a Loan Modification?

There are some basic general guidelines you canthey would be more willing to take a look at your
explore when determining if you qualify for a Loansituation in more detail. Start by writing a hardship letter
Modification. Please note that this is simply a basicto the bank addressing your current financial status
overview just to give you an idea if it should be worthand the circumstances that have caused it. Explain
pursuing with your lender. You must contact yourthat you are being pro-active and want to address this
lender directly for specific qualification requirements.problem before it becomes more severe.
But generally speaking, the following will give you aThe next aspect that you must consider is how much
good idea if it would be worth pursuing.your home is worth compared to how much you owe
To begin, first take a look at your current financialthe bank on your mortgage loan. For example, if your
situation. Are you struggling to pay your monthlyhome is worth $200,000 and your mortgage loan is
mortgage payment? Have you been forced to misscurrently $300,000 that means that you are 'upside
other bills, tap into your savings/and or retirementdown' or that you have negative equity. This means
accounts in order to keep your mortgage current? Ifthat if you tried to sell your home at the going market
so, you are probably experiencing a financial hardship.rate, you would not have enough money from the sale
What is the cause of this hardship? You must be ableproceeds to pay back the loan you took out on the
to pinpoint a specific cause to your current financialproperty.
crisis. This could be the result of a loss of employment,If this is the case, you could be a great candidate for a
reduced hours at work, medical expenses, divorce, etc,loan modification. The reason for this is because your
etc. This is the first crucial aspect of the process thatbank will want to avoid foreclosing on a home with
you must identify.negative equity in a depressed real estate market.
Your bank will need specific reasons that have putThey would stand to lose alot of money if they did,
you in this financial bind. If this is the case, work out aand they will be more inclined to work out options to
simple income/expense spreadsheet to determinekeep you in your home if you have negative equity. If
your monthly cash flow status. When all your billsyou have been rejected for a refinance for either
including your mortgage are accounted for, do youhaving not enough equity or having poor credit, a loan
have any money left over or are you in the negative?modification may be a better solution.
If you have alot of money left over, then you do notDemonstrating a legitimate financial hardship with your
have a hardship. For example, if after doing yourincome/expenses coupled with evidence that your
income and expenses, you realize you have overhome is upside down (negative equity) could put you in
$1,000 of spending cash left over you would probablya good position to attempt to negotiate a modification
not qualify for a modification.with your lender.
The reason is simple. Why should the bank voluntarilyUnfortunately, a Loan Modification is a voluntary
lower your payment when you can obviously affordprogram for Banks. That means that even if on the
your current payment? They have no incentive tosurface you seem like a great candidate, it does not
reduce your payment. But let's say after doing yourmean that they have to grant you one. Even with the
monthly budget you are in the negative about (-$200).recent government pressure there is no legislative
This indicates to the bank that you are struggling andmandate that FORCES banks to do modifications. But
that if a major financial emergency were to come up,don't get discouraged. You need to arm yourself with
you probably would miss a mortgage payment. At thisthe tools and knowledge to approach the bank using
point, you pose a threat to the bank to become athe appropriate leverage and negotiation procedure.
victim to foreclosure at any point in the future. Now