The mortgage modification process can be tedious for many homeowners. There are numerous rules that lenders hold for qualification and approval purposes. Many homeowners may face disappointment when applying for a loan modification. However, there are a few questions that can be asked prior to requesting an application from the bank that could save heartache and disappointment.
Do I have good credit? One of the quickest ways people are denied for a loan modification is poor credit, or even moderate credit in some cases. In the past, lenders have been very strict about credit scores that qualify for modifications and denying even those with 700-750 scores was not uncommon. When looking to modify a mortgage loan credit standing is very important and homeowners are encouraged to apply when they can put their best foot forward, which may be long before they default on the mortgage.
Am I in default? Lenders are stubborn about modifying mortgages that are already in default. In such cases, they may push short sales or foreclosures because they hold the opinion the debts are a lost cause. Homeowners looking to modify their mortgages have a far better chance of getting approved if they have yet to miss a payment.
Is my home considered “underwater”? Underwater mortgages are quickly becoming a problem among homeowners in America. The housing market simply cannot support home values as they have in the past and more people are finding they own homes worth significantly less than what is owed on the mortgage. Underwater homes present a problem for lenders as they are less likely to modify or even refinance a mortgage that is worth considerably more than the home’s value. These homes are often stuck in a loop with dwindling options.
Have I tried federal modification programs? There are several federal programs available to assist homeowners looking to modify their mortgage loans. The Home Affordable Modification Plan (HAMP) was developed to help those who have been denied by lenders. This program relaxes credit score and home value standards in efforts to reach more homeowners. Although they are not necessarily a first option for pursuing a modification, homeowners should educate themselves as to the qualification terms of the program when negotiating with lenders.