Two Reasons why Loan Modification is Better than Refinancing your Mortgage
Once of the things American president Barak Obama, along with his administration have done is to implement a loan modification plan. Basically, the plan focuses on the lenders. By providing incentives in order to have them modify the terms and conditions of an existing loan. This makes it easier on homeowners to meet the monthly installments. Before this plan was implemented it was very difficult for homeowners to get their mortgage altered, because most of the cost that were involved had to be covered by the lenders themselves.
How to determine if you qualify
In order for you to qualify for the loan modification there are certain criteria that you must meet. Firstly, qualifying Columbus houses must be your main residence and you need to have bought it prior to 2009. Depending on the area in which you live the loan you apply for cannot be more than $730,000. If the house is located in a more high cost area then the loan limit might be somewhat higher than the aforementioned amount.
Also, the loan is only available on the first mortgage. It does not apply to any subsequent mortgages you may have. Your mortgage has to be more than 31% of your monthly income if you are to qualify for the loan modification program. And lastly, you need to be able to show that you are facing financial difficulty which means you are having problems paying your mortgage. Whether it is because of the loss of a job, less working hour, illness, separation and/or divorce, or whatever else.
After qualification comes the process
The first thing you need to do is to get in contact with the lender. Once you have done so, you then need to request the modification plan. Some lenders who are not part of the Obama plan will probably refuse. Those who are, and there are many, will agree to the plan.
The next thing that you need to do is to provide proof of your income before tax. Your last tax return that you filed will also be needed. You will also have to provide any info regarding any assets or savings that you might have. Statements depicting your first, and if necessary, second mortgage payments and/or your home equity line of credit will be needed so ensure that you are prepared. Another thing you should take the time to do is draw up a budget that shows clearly what your out of pocket expenses are each month. It also needs to include the amounts that you pay toward your credit card and any loans.
It is only once you have assembled the required documentation that you would then move on to the final stage, which is negotiating the terms and ensuring that all the relevant documents have been correctly completed.
Modification is the better choice:
When you refinance your mortgage all the closing costs and other fees become your responsibility. However, when it comes to the Obama plan there are no fees and even if you are late with your installments the late fees, or interest, can be waived. Unless your credit record is impeccable, it is highly unlikely that you will be granted refinance, because of the present state of the credit climate. So, cost and the ability to qualify are two of the main reasons why you should investigate the option of loan modification.
If you are late with payments, or you are not able to afford remaining in your home because of the usual costs when taking out a loan, then loan modification is just what you need. This is not to say that refinance is never a viable option, because it is. For one thing, you are able to gain access to the cash in your home equity through refinancing. Also, if you have equity in the home and you would like a better interest rate, this can be achieved through refinancing. And what is more, you can apply for the improved rates even if you do not qualify for the loan modification plan.
If you want to save between eight hundred and two thousand dollars then you will need to negotiate the modification instead of having a service provider or lawyer do it on your behalf. It is easy for you to do it because of the incentives available to lenders. As long as you can offer relevant assurance of timely payments each month you should not encounter any problems.
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