Mortgage Modification – Know the Details and Rescue Your Home

If you are facing difficulties in making your mortgage payments, then mortgage modification is a method by which you can modify the terms of your mortgage outside the original terms of the contract agreed between you and the mortgage lender initially. This is especially applicable if you have adjustable rate mortgage (ARM).

In case of ARM, the interest rate varies according to the market interest rate, hence your monthly payments keep moving up and down and there is no stability. This makes it difficult for you to have a proper monthly budget. Also, if the market rates get too high your monthly mortgage payment increases drastically, and therefore you may fall in financial trouble and might even have to face foreclosures. Thus mortgage modification is your ray of hope amongst all these darkness. With the help of mortgage modification, you can work out more comfortable terms with your lenders which will help you to make the mortgage payments and avoid facing a foreclosure.

When can you apply for mortgage modification?

When you are applying for mortgage modification the most important thing to have is a hardship letter. In this letter you should explain elaborately the nature and cause of your financial hardship for which you are being unable to make your mortgage payments. You should keep in mind that the reasons that you give for financial hardship should be valid enough such as a death in the family, loss of job, medical emergency or anything similar. You would also need to provide your lender with proper documents such as tax forms, bank statements and your pay stubs which can give an insight into your financial condition. The eligibility criteria to apply for mortgage modification are listed below.

1. The mortgage that you want to modify should have been in use in its present form for a time period of over a year.
2. You should not be in bankruptcy currently.
3. The property on which you have mortgage should be your primary residence.
4. You should have sufficient proof of some sources of income.
5. You should show valid documents that your income has significantly reduced from what it was before.

What are the types of mortgage modification?

There are different ways in which you can modify your mortgage in order to gain several benefits. Read on to know about the different types of loan modification.

1. Reducing your current interest rate.
2. Changing from an adjustable rate mortgage (ARM) to a fixed rate mortgage (FRM)
3. Extending the term of the loan.
4. Scaling back the principal amount.
5. Doing away with the late fees and other penalties that require considerable payments.
6. Limiting the monthly payment you make to a particular percentage of the total family income earned.

What other alternative do you have?

If you see that you are being unable to fulfill all the criteria required for mortgage modification, then you can go for the federal loan modification program. The Home Affordable Modification Program (HAMP) has been introduced by the federal government since 2009 to help people make mortgage payments regularly and avoid foreclosure on their property. This federal program will pay lenders to modify the terms of your mortgage in accordance to standardized terms that have been developed by the Treasury Department of US Government. The eligibility criteria for HAMP, as a result, are quite relaxed and you will be able to qualify for them easily. There are also tremendous numbers of benefits that you can have from HAMP.

Thus you can see how mortgage modification can help you alter the terms of your mortgage and help you in paying back your mortgage and avoiding foreclosure.