Mortgage modification is the process of changing the terms initially agreed upon in the mortgage contract. It is a compromise strategy that was developed to make things easier for homeowners unable to clear mortgage debts due to financial constraints. Mortgage loan modification comes in different forms including reduced monthly payment, reduced lateness penalties and lengthening the mortgage loan term. Getting your mortgage terms changed is tricky business as the government is strict about loans and repayment due to the overall effects on the country’s economy. Below is a mortgage loan modification checklist on what you need in order to qualify.
- Check the date when you obtained the mortgage- This is the first and most important step on the mortgage modification checklist. To qualify for a change in terms for your mortgage contract, it is a requirement that you obtained it on or before 1st January 2009. If your mortgage plan was made after this you are not eligible for a modification and there is not much that can be done about it.
- Go through the lender’s eligibility rules- This is a very important step. Lenders have many different requirements but the following are the ones that are common to most:
- The debt should be less than $729,750.
- The requester should have a source of income.
- The property under mortgage should not be vacant or condemned.
- The requester should not have a criminal record, especially fraud-related charges.
- The requester should not be currently or in the past 24 months have received another mortgage modification.
If there are more requirements they will be made available by the lender. If you meet all the requirements, then you can proceed with the next steps on the checklist.
- Work out your debt to income ratio- The next step on the mortgage modification checklist is a calculation of debt to income ratio. This is a ratio comparing your monthly debt payments to your gross untaxed income. The debts include every reduction made from your paycheque including credit card payments, health insurance and the mortgage itself. Different lenders have different ratio requirements thus you should ensure that you have this information beforehand. Typically, a ratio of between 36%-45% is considered a potential for a mortgage modification. If you’re having an issue with bad credit read our post on credit repair.
- Obtain required paperwork for the application- Obtaining permission for mortgage modification is a formal affair and requires the requesting homeowner to follow a series of steps in application. Paperwork for an application helps the lender get the information that they need from you to gauge your eligibility. The paperwork for application should be made available by the lender and is at the time available for printing from online websites.
- Submit an accurate and complete request package- The next step in the checklist for mortgage modification is accurately filling in the required paperwork and submitting it on time. Make sure that all the information that you have been asked to provide is available in the package that you submit. Lack of even one piece of this information makes your plea lose priority and reduces your chances of success in getting the modification.
- Provide a valid reason for your request including proof- The next thing to do on this checklist is to appeal to the processors’ humanity. More often than not, the requests for modification are processed by people. Make sure that you explain your case clearly and in detail so that they understand your position and see your need. Avoid making up stories and exaggerating. If possible, provide proof for example bankruptcy and hardship documents. This information is usually submitted together with the formal application papers.
- Make follow-ups and be patient- This is the final step in the mortgage modification checklist. After you have done your part to the best of your ability, allow the lender to do their work. Be patient but do not shy away from inquiring about the progress of your case. This is important as it lets you know whether you need to start the process all over again should there be a problem the first time.
It is important to be completely sincere in your application process as lenders are not tolerant of dishonesty. Also, beware of mortgage modification scams that target homeowners at risk of foreclosure using the modification as a cunning ruse.
Do you have any queries or concerns? Contact me here or Call (414) 531-0723 for more information.