Why would someone want to do a loan modification? Maybe they need to reduce their monthly payment, or reduce their monthly interest rate? This can all be done through a loan modification. Does that sound to good to be true? Sometimes it is.
Loan modification programs were created to help people keep their homes after they became financially distressed and unable to make their mortgage payments. They were never meant to be a means for people who could afford their mortgage to reduce their monthly payments. For that reason, qualifying for a true mortgage modification program can be difficult.
So how does this work?
You’re behind on your mortgage and the lender sends you a letter explaining your options. You can choose to do a loan modification, short sale, or deed in lieu when you have defaulted on your mortgage. Remember that you are not making your mortgage payments during these programs which pushes you towards foreclosure. The most important thing to know is that the lender does not “pre-qualify” you to see if you qualify for a loan modification, they just give you the option to pick what you would like to do to see if you qualify. It is very important you pre-qualify yourself so you don’t end up with a foreclosure date and now you are facing foreclosure. For example, if you are not working and cannot provide income, you will not qualify for a loan modification. Evaluating your current financial situation is very important in deciding which route to go.
How do you qualify for a loan modification?