Times are hard and many people need to refinance their homes because they are having problems keeping up with the payments and may even be facing foreclosure. Fortunately, now there is help available through a loan modification program. These programs are designed for borrowers who are already in default 30 days or more and for those who are not able to get refinanced because of a lowered house value or because they are self employed.
The state of the economy has hit hard and in the process has taken businesses and jobs with it. Home values have fallen, paychecks don’t go as far, and all of this has lead to homeowners not being able to pay their mortgages. As a result, many are now facing foreclosure.
In fact, there are a large number of people who already owe quite a bit more than the home is currently worth. The problem is compounded by homeowners who are selling below appraised values to get out from under mortgages they can no longer afford.
There are companies that can assist you through your loan modification. Loan modifications are typically too complicated for the average person to complete on their own, and information can be hard to find. A loan modification specialist can help you skip all the hassle and efficiently guide you through the process. It is possible to get a free consultation to see if a loan modification program would help your situation.
There is a catch to the loan modification program: simply that there can only be one modification during the life of the loan. So it needs to be handled in the right way. For homeowners more than a month behind, quick action is needed in order to complete the modification process.
What the loan modification program does is to get your mortgage payments (principal and interest), your insurance, and any association fees reduced to where it is no more than 31 percent of your gross monthly income. To do this the lender adjusts first the interest rate you are paying and then the principal amount owed.
So if you have a rate of say 7 percent, then you may get a rate as low as 2% and your loan term may be extended to 40 years instead of the normal 30 years we have become accustomed to. Also the lender may then forgive a part of the principal owed, as long as the new principal amount owed is not lower than the value of the home.
However, lenders are not required to take part in the loan modification program. To encourage their participation, the government is offering incentives to these companies. For example, for every year that a borrower remains in the program, the government will give the lender $1000 for up to 3 years. Then of course there is an incentive for the borrowers as well to stay in the program, the government will give an additional $1000 to the borrower by applying it directly to the principal of their loan over a 5 year period.
Even borrowers who are already in foreclosure may qualify for this program and borrowers who are in bankruptcy may actually be court ordered into loan modification.
The loan modification program is an opportunity that should be taken advantage of by borrowers who are facing eminent problems with meeting their mortgage obligations or who are already in trouble. Borrowers should speak with a professional in order to make the process easier and to get the correct mortgage reduction for their needs.
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