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Loan modification, a way to lower your house payment without refinancing
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Financial well-being is part of total wellness for me. How can you be healthy in body and mind when you’re stressing out about money? And, if you’re like thousands of people in Florida and nationwide, your mortgage is higher than you can afford and you owe more than it is worth. But, before you decide to let it go into foreclosure or sell it by short sale which can hurt your credit rating, you might want to consider a loan modification. I found out about loan modifications when I asked my finance person about my options for refinancing. Since my home is worth less than what is owed on it like many people in Florida, traditional refinancing isn’t an option. My loan officer suggested that I call my own mortgage company and ask for a loan modification. I called the number on my monthly statement and told the woman who answered the phone that I needed a loan modification. The woman on the other end knew exactly what I was talking about and she transferred me to a separate department. After a series of questions about my finances and what kind of money I had coming in (my debt to income ratio,) the loan modification department said they would send me out some paperwork to see if I qualified. Now, I am in the process of gathering 2 months of bank statements, 2 paystubs, my last two years taxes and other financials. The process is similar to qualifying to buy a home. The goal is to show them that you need a lower payment but to prove to them that if they do lower your interest rate that you do have the financial stability to pay the adjustment amount.
When I mentioned that I was attempting to get a loan modification to a friend of mine, she said she had just done this and is saving 500.00 a month! She said she didn’t have to pay a dime to do it and that the mortgage company lowered her interest rate for the life of the loan. There are a lot of places offering to do these loan modifications for you, and of course some are scams, so beware of anyone asking you to pay anything up front. I am pursuing this on my own through my own mortgage company. I purchased my home as a second home which carries a higher rate. I have since homesteaded this home, and am requesting the bank to lower my interest rate about 3 points which would lower my payment and I don’t want to have to refinance to do it. Per my suggestion, a friend of mine in Minnesota is pursuing a loan modification. The snag that she’s running into is that since she hasn’t been late on payments and makes descent money, they want her to prove she really needs a fixed lower interest rate. So, she is in the process of verifying that she makes less money this year at her job then she did last year because of reduced hours due to cutbacks. It’s a bit of a hassle to get the information and paperwork together, but if it saves you a few hundred bucks a month, it might be worth it. I’ve included some links with more information on loan modifications.
www.hud.gov/offices/hsg/sfh/nsc/faqlm.cfm
