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Important Questions Relating to a Loan Modification

For homeowners that want to update their mortgage loan to avoid foreclosure, a loan modification is a great solution. With this, the homeowner has a number of options, allowing the lender to provide the type of loan that would best suit the personís need. However, for people in a financial crisis, the process can be overwhelming, confusing, and aggravating. These people are already struggling with a devastating situation so the last thing they need is more tough decisions.

However, with the number of people trying to avoid foreclosure being so incredibly high, homeowners need to know that a loan modification might be the very option needed. The first step would be for the person to gather all the information possible pertaining to the loan, but also his or her finances. With this, the information would be presented to the mortgage lender or HUD to determine if a loan modification would work.

The good news is that because there are so many people in this very situation, the government is updating and creating new programs to help. In fact, getting a loan modification approved is easier now than ever before. Before a person makes the decision to go this route, it would be important to ask very specific questions and then look at the answers carefully.

Of course, the lender or a representative from HUD would be happy to answer questions and help in whatever way possible. After all, lenders do not want people to foreclose on homes in that it means they ultimately lose money. Some of the more important questions that should be asked specific to a loan modification include:

  • Loan Modification Concept - The first question would be about the concept of a loan modification. The answer is that the homeowner has permanent changes made to the existing mortgage loan whereby the loan is reinstated instead of being defaulted on. The outcome is the homeowner ending up with lower house payments, making it easier to meet the loan requirements and saving ownership.
  • Late Fees - The next question for a loan modification would pertain to late charges. The way this should work according to the Housing of Urban Development or HUD is that the lender should waive all accrued late charges. This way, the homeowner is getting a much-needed break, again avoiding foreclosure.
  • Benefits of a Loan Modification - Probably one of the most common questions asked about a loan modification is regarding the way in which the government programs benefit the homeowner. Lenders have been allocated $75 billion as a means of helping people avoid foreclosure in this tough financial economy. This means lenders are motivated to get people out of a bad situation in that the funding received depends on it. However, there is also motivation for the homeowner in that if the loan modification payments are made according to the new schedule, a credit toward the balance of the loan up to $5,000 might be offered.
  • Loan Qualification - Next, the question of qualification for a loan modification is also one of the more popular ones. Lenders are going to look at each homeowner to determine if payments on the new loan could be paid. By providing the lender proof of income, monthly expenses, and in some cases completing a financial statement is all the lender needs. Once convinced that the homeowner could meet the financial requirements for the loan modification, the loan would be approved.
  • Delinquency Status - Many people in the process of losing a home want to know if the mortgage payments have to be in arrears for a loan modification to be approved. The answer to this is that being delinquent certainly proves the need for this type of loan but many lenders help homeowners out with a loan modification that are not delinquent on payments.
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