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Loan Modifications Can Help Save Your Home

Sometimes, things can happen that change the most carefully laid out plans. While you may have been able to afford making payments on your home loan when you first signed the agreement, something may happen down the road that affects your long term ability to repay the loan. In these cases, there may still be something that you can do in order to avoid foreclosure and save your home. One such option is known as a loan modification.

A loan modification is an agreement that is meant to be a long term solution for borrows that are unable to repay a loan. The modification normally involves extending the length of the loan, putting a different type of loan into place, or reducing the interest rate on the loan. Sometimes the modification agreement may involve all of the above. It may seem like a lender wouldn’t be open to modifying a loan when they know the borrower will be unable to repay it in the long run, but it may actually cost less for them to modify the loan than it would cost them to allow the borrower to default. A successful modification should offer you an affordable and sustainable monthly payment amount.

Whether or not the loan modification will be approved normally depends on whether you can provide proof that you will be able to afford the new loan payment that is set forth. Most lenders will require that you provide them with proof of income and other financial information so that they can see you will be able to afford the new payment amount not only now, but in the future as well. You do not have to be delinquent on your payment before you can request this modification. It may be possible to go ahead and talk to your lender about the modification now if you can foresee a problem meeting your payments in the future. It may even be in your best interest to inquire about a modification ahead of time, before it actually becomes a problem.

Before making the request, you will want to make sure you do a fair amount of research. You’ll want to have a general understanding of the process so that you can make an informed decision and be sure that the loan modification you agree upon will benefit you. You’ll also want to have a good idea about what it takes to get a loan modification approved so that when you can approach your lender, you can have all of the necessary information and documentation handy.

In order to try to help make the loan more affordable for you and thus avoid a default, some lenders are even willing to waive late fees, or may allow you to include any outstanding amounts in the new loan agreement. When talking to your lender about a possible loan modification, ask for a complete breakdown and description of all the fees and penalties from your lender. It is possible that there may be some fees listed that are not justified. If so, ask for them to be waived.

If you’re currently struggling to make payments on your home loan, or have already fallen behind and don’t see any way to catch up, you may wish to approach your lender and ask them about getting a loan modification. Not only can this potentially save you money, but it can save your home as well. Just be sure that you will be able to provide your lender with proof that you will be able to continue to make payments on the loan after it has been modified.

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