One foreclosure alternative that has gained interest in recent months is mortgage modification. While many people have heard of them, few people actually know what they entail or even how to go about applying for one. The key is preparation.
Too often people rush into the mortgage debt relief process looking for a way to save their home from foreclosure and get caught up on their mortgage payments without taking the time to prepare. While foreclosure is a scary process, and one that can happen quickly, going into the mortgage modification process unprepared is likely a mistake.
First, know whether mortgage modification is even your best option. If you are experiencing a financial hardship that is expected to last a significant period of time, or you are unable to maintain even a small payment, mortgage modification may not be for you. The average mortgage modification lowers monthly payments by $400 or less. If you cannot afford to maintain your mortgage payment after a reduction in your payment by $400 or less, mortgage modification is probably not for you.
Next, be sure that you even qualify. Not all lenders are quick to offer mortgage modifications and some may even carry strict qualification criteria. You may be required to have a credit score of 650 or higher in order to be eligible for a modification. Further, many lenders need to see proof of your financial hardship before considering you for a modification. It is important to have your documents organized when you go in to discuss your options with your lender.
Last, do your homework before talking to your lender. It is important that you know what type of modification will best help you. Do you need a temporary suspension in payments? Or is a lower monthly payment for the duration of your loan term going to work better? Mortgage modification is essentially a negotiation and knowing how your lender can help and what you can afford to pay before entering can boost your chances of a successful modification.