Tips When Preparing to Apply for a Loan Modification

The loan modification application process can be a confusing, complicated and lengthy process.  When the lender repeatedly asks for new applications to be completed and more documentation to be sent in, it can be tempting to jump on the first modification offer that is presented to you, even if the offer is not in your best interest.  Below are some tips that should be considered when preparing to apply for a loan modification that will hopefully result in a modification that meets your needs.

Tip 1: Be prepared.  When you apply for a loan modification, your lender will want detailed information regarding your financial situation.  The mortgage company will ask that you complete an application which asks for information regarding your assets, debts, income, and expenses.  In addition to the application, it is likely that the lender will require copies of various financial documents.  Prior to applying for a loan modification, gather as many of these documents as you can so they are ready when the lender asks for them.  Regularly these documents are include pay-stubs, account statements, utility bills, etc.

Tip 2: Prepare a budget.  The loan modification application will most likely ask you questions regarding your income and expenses.  This is one of the most important aspects of a potential loan modification because you must be able to show that you will have the ability to make the modified payments under a loan modification agreement.  Therefore, having this prepared in advance will speed up the application process.

Tip 3: Create a “hardship letter”.  Many times when applying for a loan modification, the lender will ask you to provide a written statement of what caused your hardship or your inability to make your current payments.  Use this letter to detail any job loss, injury, sickness, divorce, death, or other factors that lead to the need to modify the mortgage payments.

Tip 4: Document problems with the property.  If there are issues with the property that the mortgage company would have to fix if it foreclosed on the property, it might make a loan modification a more attractive option.  Document and provide proof of any of these issues such as plumbing problems, foundation issues, cracks, leaks, etc.  Also, a recent appraisal of the property might be helpful in this regard.  If might be helpful to a modification if you can establish that the property is worth less than t he mortgage company believes it to be.

Tip 5: Consider your needs.  There are many reasons why a person might desire a loan modification.  Some reasons will require different solutions than others.  For instance, a person that was temporarily laid off, but obtained a new job within a few months but fell behind on his/her mortgage will have a different need than someone that became permanently disabled.  A retired person on a fixed income will have different needs than a 30-something that has a greater earning potential.  

Following these tips will not guarantee you a loan modification, but it will keep the ball in the lender’s court, which will hopefully speed up and ease the application process.  This will hopefully place the odds of obtaining a loan modification in your favor and help you to avoid the pitfalls of the application process.  

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