26 Oct Applying For A Home Modification Loan: What You Must Know
The number of homeowners who have fallen victim to foreclosure is much greater than the number of homeowners who have received help on their home mortgages. But that doesn’t mean that every situation involving a temporary financial setback needs to end this way. By being fully informed about home loan modifications, you will be much more likely to qualify.
How A Loan Modification Works
A loan modification is when you reach an agreement with your lender in which the terms of your original loan are modified. For example, the length of your loan may be adjusted so that you can make smaller monthly payments to allow you to stay in your home. The loan modification is an alternative to a home refinancing and is used in cases where a homeowner is ineligible for a home refinancing. The purpose of loan modifications in Long Island is to assist those who are experiencing long-term hardship. Those who apply for a loan modification will need to be several months behind on their mortgage.
The Pros And Cons Of A Modification Loan
The upside of loan modifications in Long Island is that you will be able to stop the endless phone calls and you may also be able to stop a foreclosure. However, a loan modification will likely lead to you paying more money in the long term, since the loan will be stretched out further and you will be paying more interest on the loan. However, there are some cases where the lender will lower your interest rate in order to make it possible for you to make your payments, which would also reduce the overall cost of the loan. This is especially the case if the bank believes that it will have a difficult time selling the home. The bank can also convert the interest rate from a variable interest rate to a fixed rate.
Loan Modifications Are Complicated
One of the challenges of a home loan modification is how complicated it can be to understand one. There is so much legalese involved that can make it difficult to know exactly what you are agreeing to. Even though you may be struggling with your finances, it is a good idea to consult with a lawyer to assist you in understanding what you are signing. Loan modifications are confusing partially because there is more than one way to modify a loan.
Getting The Loan
You will need a financial statement, a proof of income, your most recent tax return, and a hardship letter in which you explain your situation. Before you can be approved for a home modification loan, you will usually need to complete a trial period in order to prove that you will be able to afford the loan at the new rate.
Some banks may be resistant to providing a home modification loan and there will be more you must do to increase the chances that you will qualify. Ask as many questions as possible about your bank. Ask about if there is anything else you can do to qualify and also ask if there are any other programs available that can help you stay in your home. You will need to be persistent and you may be forced to frequently resubmit documents. Remember to stay in touch with your bank because you are one of several customers they serve. While getting a home modification loan can be a hassle, if it is the only way that you can save your home, and if you know what you expect walking into one, you will come out on top.