How To Prepare For Loan Modification

If you are facing foreclosure, can’t make mortgage payments, or your house has lost up to twenty five percent of its value, you may qualify for a loan modification. If you have received a notice of default and are urgently trying to stop foreclosure, you are probably not thinking straight. Most likely you just want to get it over with. You are panicking and you are not able to keep your cool.

But getting your ducks in a row is critical at this time. You only have one shot at this negotiation with your lender. Be prepared. Gather all your income and expenses for the last two years. The documents you will need to include in the package are pay stubs, income tax returns, bank statements, property tax bill, etc. Compile all your mortgage documents and add them to the file. Pull together all bills, paid and outstanding, from the times you were falling behind on the house payments until now.

Include utilities, auto payments, credit cards, student loans, child support, medical bills. Find the winter and summer heating and cooling bills. You need to also include everything that documents why you fell behind in your payment or can no longer afford to make high mortgage payments or payments at increased interest rate. An employer's notification of reduced hours or a layoff may be helpful. An invoice for an auto repair or a furnace replacement, a shutoff notice from a utility.

Second preparation step in your loan modification negotiation is to prepare a Hardship Letter.

You will need to demonstrate to the lender that it is in the bank’s best interest to keep you in your house. A good loan modification hardship letter shows valid reasons for example, been laid off, hospitalized, unable to work, or mortgage loan adjusted, was deceived into a loan fraud etc.

When putting together your hardship letter, be sure to point out everything you can. However, you will need to demonstrate how you are going to make payments on your new, reduced loan. If you cannot possibly make payments, it is unlikely that loan modification is the option for you. Talk to a financial specialist if you have lost your job and consider other options. If your pay has been reduced, or your loan balance is higher than your home value, but if you can still make mortgage payments, you may be a good candidate for a loan modification.