The loan modification plan was instituted by President Barak Obama and his administration. By providing lenders with hard to resist incentives they then agree to alter, or modify the terms of a person’s current loan. For homeowners this is great news, because it makes it easier to meet the installments each month. Because some of the cost involved used to be for the lender to pay it was almost impossible to have mortgages on Columbus houses modified prior to the plan being implemented.
Do You Qualify?
In order to qualify for Obama’s loan modification program, the home must be your primary residence, and you must have purchased your home before January 1, 2009. The Obama plan does not apply to jumbo loans, which in most cases means your loan amount can’t exceed $729,750; however, the allowable limit may be higher in high-cost housing areas.
You need to bear in mind that the modification is not available on second mortgages – only on the first one. Of your monthly income at least 31% must go toward the mortgage or you will not qualify for the modification. And, as unpleasant as it may be, you will be required to demonstrate that you are currently experiencing financial difficulties that are creating problems when your mortgage payments are due. It does not matter if these problems have arisen because of a job loss or some other reason. The issue is that you will need to share this info.
The process that follows qualification
The first thing you need to do is to get in contact with the lender. Once you have done so, you then need to request the modification plan. Some lenders who are not part of the Obama plan will probably refuse. Those who are, and there are many, will agree to the plan.
The next thing that you need to do is to provide proof of your income before tax. Your last tax return that you filed will also be needed. You will also have to provide any info regarding any assets or savings that you might have. Statements depicting your first, and if necessary, second mortgage payments and/or your home equity line of credit will be needed so ensure that you are prepared. Another thing you should take the time to do is draw up a budget that shows clearly what your out of pocket expenses are each month. It also needs to include the amounts that you pay toward your credit card and any loans.
Once you’ve gathered this information, you will go through the final process with your lender of negotiating the terms and completing the necessary paperwork.
Modification is the better choice:
There are two main reasons why you should choose to modify your loan rather than opting for refinance. The first reason is cost and the second is your ability to qualify. Because of the present state of the credit climate you will definitely not qualify for refinance unless you have an excellent credit record. Also, when it comes to refinance you are responsible for closing costs as well as other fees. The Obama loan modification program charges no fees at all. Also, if you are behind in your payments any late fees and interest can be waived.
Modification is the best option if you are falling behind on your payments, or if you could not afford to stay in your home with a new loan at conventional rates. On the other hand, refinancing is a better option if you have equity in your home and are looking for a better interest rate, even if you don’t qualify for Obama’s modification plan. Refinancing is also the only way to cash out if you want to tap into your home’s equity.
You might opt for a professional, such as a lawyer or service provider, to do the negotiation regarding the modification you seek. However, you do it yourself and save between eight hundred to two thousand dollars, which is the standard rate. Thanks to the incentives the plan offers to lenders it is easier for you to do the negotiation yourself. If you plan the case and provide proper assurance that you will make the monthly installments everything should be fine and in place.
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