Loan modifications seem to be on the top of everyone’s mind these days. They were really talked about a lot during the early days of the housing crisis, yet homeowners still find themselves struggling to make payments on bloated, high interest mortgages.
In fact, when loan modifications first came to prominence during the housing crisis, roughly 9 million homeowners needed their loan modified. Yet, banks and other lenders had only approved roughly 90,000 loan modifications at the time, which is only about 1% of the total who qualified. If you didn’t have all of your ducks in a row, you’d find it nearly impossible to get approved for your loan modification.
Guess what? Things aren’t nearly as bad as they were when the housing crisis was in full swing. But as a homeowner looking for a modification to your loan, you definitely have to dot all of your I’s and cross all of your T’s to ensure you’ve given yourself the best chance of qualifying and getting approved for a modified mortgage.
To help you make this happen, we’re going to share our best loan modification tips with you below. So stick around to discover how you can have an easier chance of getting approved for a loan modification in the near future.
Attention to Detail Is Crucial to Your Success
When you first approach your mortgage servicer about a loan modification, he or she is going to hit you with lots of information and paperwork that needs to be filled out. Many homeowners become completely overwhelmed and fail to pay proper attention to detail during this crucial time in the loan modification process. If you really want a modified loan, you’ll have to overcome your feelings of overwhelm and get your mind right and your paperwork in order sooner rather than later.
At this time, your mortgage servicer is going to ask you to fill out paperwork and lots of it. Make sure you do it properly and get everything perfect according to their instructions. In fact, you should always thoroughly read over the instructions as many times as needed to make sure you get everything done right.
You’ll also have to collect different forms of documentation that they’ll request to determine if you qualify for a loan modification. They’ll want to know about your income and the income of other people in the home, proof of employment, and other things of this nature. So if they ask you for documentation, make sure you give them everything they need and fill everything out in its entirety. And for goodness sake, do not skip over or neglect any of the requested documentation because you might be denied for your loan modification, and you’d obviously rather avoid that like the plague.
Getting the Hardship Letter Right Is Critical to Receiving Loan Modification Approval
When drafting your hardship letter, make sure you put plenty of thought and a great deal of effort into crafting this document. You have to make it seem like you are the perfect candidate to qualify for a loan modification, and you have to let the lender know that without this modification it could be the difference between losing your home and saving it from foreclosure.
Lenders want to know that you have made a commitment to stay in your home. A good way to prove it is to prove your emotional connection to the home in your letter – i.e. you’ve raised your children in the home, it’s your hometown, etc.
This might not seem like a big deal, but lenders will look upon you more favorably if you can show them that you have a strong connection to this property. They will know that you aren’t going to abandon it at the first sign of trouble so you will appear to be much more qualified.
You also need to prove that because of the modification you will be able to afford to make all of your mortgage payments in the future once the modification goes through. If you cannot clearly prove this to your mortgage servicer through the hardship letter and other forms of documentation, you’ll have a difficult time appearing as the ideal candidate for this particular offering.
Besides paying close attention to detail and writing an emotionally appealing hardship letter, you can also take a few other critical steps to ensure you qualify for a modification. One thing is to make sure you keep your credit rating up, because the higher your credit score, the better. A second is to keep copies of every letter of correspondence. If you do all of these things, your chances of being approved for a loan modification go through the roof.