Mortgage Modification

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Mortgage Modifications

A mortgage modification is a home saving renegotiation or reworking of an already existing mortgage. Many people in America are facing foreclosure, bankruptcy and eviction from the places they call home. Modifying a mortgage is not a simple task. It's not like buying something in a store. Modifications require a great deal of accounting and bargaining. If you are thinking about a mortgage modification, please let us know so that we can help you. If you should choose to go at it alone, please know that you are taking a big risk. You stand to lose a great deal of things; your house, your credit, your money and any savings you may have built up. Mortgages are a long term investment, so when you get a modification, you should be absolutely sure that you are getting the best deal for the next 15, 20 or even 30 years. The difference between experienced and unexperienced, professional and off the cuff can be tens of thousands of dollars in the best case scenario. Worst case, you still lose your home.

Who Qualifies for a Mortgage Modification?

Many home owners are struggling to make ends meet. Many have lost their jobs, many more have had pay cuts or if they are a business owner, they have probably lost customers. In this economy, you may also need a "mortgage mod" if you are "upside down". A person who is upside down is a person whose initial loan is worth a significantly more than the actual value of their home. This kind of modification is becoming more common as the housing market continues to fall. The housing markets have been going down for a while now, and regardless of whether or not they have bottomed out, people are asking their lenders to lower their mortgages to a fair level and more reasonable level.

Another type of person who is eligible for a mortgage modification is someone who has a high interest rate mortgage or an ARM(adjustable rate mortgage). These people are now, more or less, caught between a rock and a hard place. The reason for this is that it is unlikely for them to make more money in these times and most importantly, what they pay or what they need to be paying on their mortgage is going up while the value of their home has either stays the same or is going or has gone down.

Summary of Mortgage Modifications

Qualifications For Modifying Mortgage:

  • High interest rate
  • Upside down
  • Lowered income
  • Adjustable Rate Mortgage(ARM)
  • Late on payments
  • Financial troubles or hardships
  • High Debt to income ratio 34-37% or higher

The Mortgage Mod and it's Benefits

What exactly do mortgage modification accomplish and why would the bank or lender want to renegotiate? Well, first off, in the event that the home owner does not get a mortgage modification and continues to either spend at a faster rate than the rate that they make money or continue to not pay the monthly mortgage both the lender and the home owner will lose. When it comes down to it, the lender has to look at the bottom line. If a homeowner were to stop paying their mortgage, they would stop making money right then and there on something they have already invested a lot of money in. If this were to continue the lender would have to foreclose the home and evict the owner thus causing three major problems. First of all they will no longer be making money and it is likely that they wont be making money for some time, as they would need a new buyer. Second, the lender would have to worry about the home. If it were to be damaged in any way, they would lose money. In addition to that, the house needs tending to. Third, when the lender would resell, it would be at a lower price because the house was lived in and likely encounter wear and tear and in the markets right now, even if the home was kept in pristine condition, the house has likely lost a large amount of value. In any case, even in the best scenario, the lender is going to need to mark down the price causing a much larger long term loss. There are of course other complications, like paying property tax and insurance. These will leave the lender paying for something that they once were paid for.
Some people know this and use it to their advantage to get a little bit more out of the lenders. When most people think about mortgage mods, they think that they just need to get it to an affordable level or rate, but that affordable level may not be fair to you. It could still be not only over priced, but a hazard to your financial stability. Although it's not like you are doing the banks any favors by keeping the house, after all you get to live in it, there are many benefits to just reworking the loan from the lenders point of view. Mortgage mods have gained a lot of popularity over the years and as this economy continues to takes its tole on people.

Conditions to Modifying Mortgage

As stated before, there are many reasons for people to modify a mortgage, but the lender has every right to turn the offers down if there is no modification scheduled into the existing contract. After all, the home owner signed a contract to pay a certain amount at a certain rate. Having said that, lenders are normally very good with finances and they know that a house with an unstable financial situation spells trouble in the long term.
Lets start with the basics. Everyone has expenses, whether it's credit card balances that needs paid off, equipment for a home business, car payments or maybe the home owner has kids. However, there gets to be a point when those expenses can overload a person or can leave little to no room for modifying the budget in the future without effecting the mortgage payments.
All of these things are a good reason for asking for a mortgage modification. The Federal Housing Administration limits on debt to income ratio is generally between 31/43, conventional financing limits are typically 28/36. This means that if you have a debt to income ration of 40% or above, give or take percentage or two, you should think about reducing spending. If you continue to have an unhealthy debt to income ratio, the result may end up being and empty bank account.
As many people know, if you don't have the money you wont pay. In addition to that, home owners have a right to worry about themselves and their family first. If you can't take care of yourself and your family the way you would like to, you have a great reasons to ask to modify. As for the legal issues, that is normally not a huge issue, again, if you can't pay you can't pay and if you file bankruptcy, all your debts go away, but that is a last resort. If you should choose to modify, make sure that when the mortgage is modified, that the modified mortgage will be good for a while. The lender wont take to lightly to continuous modification and may take this as a threat or a warning that you, the home owner, may not be good for the money you owe.

Beware of Mortgage Modifying Scams

Beware of people offering services both for a fee and for free. Make sure that you are not giving out your social security number and other personal information to a company that doesn't exist. Make sure to check out the organization with the Better Business Bureau. The mortage modification/mortgage modifying business is a booming one where people on all sides stand to make a great deal of money. This means that there are many legitimate and illegitimate businesses out there. That's not to say you should go at this alone, it is always best, when you aren't sure of what you are doing, to seek professional help, like you would in a court trial, but be careful. This is a fairly new industry that is really just getting started, so there is a lot of confusion and there are fewer mortgage modification specialists in this field compared to others that have been around for a while.

Benefits to Mortgage Modification

There are, needless to say, many benefits to modifying a mortgage. First of all, the home owner will pay closer to the value of the home on paper and will be able to live a better life because of the saving. In cases where the housing market has taken a downturn, a mortgage modification will help reset everything to be fair in todays market. Most people will also start using their credit cards while trying to pay off a large mortgage, thus piling up debt before they modify. The reason people will do this is because they are optimistic about a new job or think that they can modify their life to cope with the shortage of money. A lot of times what ends up happening is the homeowner will end up with credit card bills and a mortage to pay at a later date and odds are both will be charging interest they can't afford. That's not to say a few people haven't been successful, but a mortgage modification can help people get back on track and start paying off other bills including car and credit card bills. They may also be able to pay off their mortgage much faster and own the house much earlier. Although modifying a mortgage may not solve all a homeowners problems it could be a large part of a general move to a healthier financial situation.

Alternatives to a Mortgage Modification

If you cannot get a mortgage modification and you are in foreclosure you can and probably should seek a foreclosure attorney. The foreclosure specialist will be able to asses your case and decide whther or not the foreclosure is justified or not.

Mortgage Modification
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