Saturday, January 05, 2013

The Advantage of Having a Loan Modification

A Guest Post by Sushil

For those who cannot keep up with mortgage payments, bankruptcy is a haunting perspective. This is one of the most traumatic things that can happen in one's life: losing the home and the financial stability is something that leaves deep scars for a long term. Recently, the government has introduced the loan modification program, in order to help families cope with such situations, and keep their homes, even after the mortgage has become a significant burden.

Things to Consider Before Applying for Loan Modification

As with everything else, there are both advantages and disadvantages when you get a loan modification, so it's not the ideal solution for everybody. Before you start working on this, there are several questions you need to answer, and some of them are quite tough issues to face, so prepare yourself for a rough period.

First of all, of course, determine whether you qualify for the loan modification program. In order to do this, the house in question must be your primary residence, and the value of the monthly payment must exceed 31% of your income. In addition, the entire mortgage should not exceed $729,750. You will also be required to provide evidence that your financial situation has taken a turn for the worse since you initially applied for the mortgage bad credit loan. If the current problems are due to poor planning from the start, there is little hope that you will be accepted into the program. Also, you have to make sure that your current lender participates in the program, since not all banks do.

Once you've cleared all these aspects, you have to determine if the loan modification program does you any good. Keep in mind that the amount you owe to the lender will not be decreased; quite to the contrary, it may increase, since the repayment period will be extended, and therefore the principal will accumulate more interest. However, the monthly payment will be lower, and therefore more affordable.

You have to calculate if this new, lower monthly payment will actually make your life easier. If it's still out of your budget, you should look for other options. Also, you have to factor in the price of the house; considering that the real estate market is getting worse by the year, the prices will continue to decrease, and therefore, if you want to sell the house in the future, you probably won't get the amount you put into it in the first place.

Why Apply for a Loan Modification After All?

With all these in mind, it may appear that the no credit check loan modification program has only disadvantages and it's not worth considering. However, one should not ignore its main advantage, and the main purpose of the program: it will help you keep your home, and avoid bankruptcy.

The lower monthly payments may be exactly what you need in order to set your financial situation in order and to regain control over your life, so, before taking any drastic measures, such as selling your home or filing for bankruptcy, the loan modification program is definitely a viable option.  

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