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How To Prepare A Hardship Letter

how to prepare a hardship letterOne of the requirements when applying for a loan modification is that you must show that your financial situation is so bad that without a loan modification you cannot continue to make your monthly mortgage payment.  This is done by writing what is referred to as a “Hardship Letter.”  In part 3 of this series, you will learn the basics of preparing your hardship letter.  If you missed the last part, it was entitled “Steps To Take When Applying For A Loan Modification“.

What Is A Hardship Letter?

A Hardship Letter is where you will have to convince your lender that due to specific reasons you are unable to keep up with your mortgage. You would also explain to your lender what changes you are making or are prepared to make in order to make your mortgage payments should you be approved for a loan modification.

When preparing your hardship letter, it’s important to be honest.  Your lender will require documentation from you to back up everything you claim in your Hardship Letter.  They can see your credit file too! So make sure you don’t make a statement about something if you do not have proof.  Failure to provide proper documentation can question your credibility with your lender and cause your application to be denied.

Here are a few simple guidelines you can follow to help you create a compelling and informative Hardship Letter.
What Kinds Of Situations Would Be Considered A Hardship?

Everyone’s hardship is relative to that person’s own situation.  In other words, what may be a hardship for you may not be for another.

However, there are some typical scenarios that are very common. (Please note this only a short list of typical reasons homeowners list.  It does not mean you cannot list others not mentioned here.)

Here are some examples of a valid hardship.

  •    The death of a spouse or other family member
  •    Unemployment due to a job loss
  •    New job but with lower pay (or a pay cut)
  •    Medical emergencies
  •    Divorce
  •    Adjustable interest rate increases
  •    Too much overall debt

How To Write Your Hardship Letter

Your Hardship Letter is a very important document to your lender.  So it’s extremely important to take your time and really compose your thoughts before you begin writing your letter.  You want to be thorough but you don’t want to ramble on and on either.

State Only The Facts

What you write should be truthful and should convince your lender you are having major financial problems and need a loan modification in order to help pay your mortgage. Remember whatever you state as a reason for your current financial crisis you will have to show documentation as proof.

Keep It Short And Simple

One page…two at the most is long enough.

Describe The Specific Cause of your Hardship

If for example you have missed mortgage payments state what caused this to happen.  Was it due to job loss? Medical or some kind of family emergency?  You need to be sure that the dates of the missed payments correspond to the circumstance that caused you to not make your mortgage payments.  Use dates to references the times in which hardships happened to you.

Show Good Faith To Your Lender

Not only do you have to prove hardship with your lender you will have to reassure the lender that you are taking steps to get control of your finances.

You Need A Plan

You’ve stated your hardship, you’ve shown what you’re doing to fix your situation.  Now you need to state what your plans are going forward that will allow you to financially meet your obligations once your loan is modified. Are you getting credit counseling?  Maybe you’re a taking financial planning class?  Cutting unnecessary expenses?

Ask For A Second Chance

You’re only human.  Humans make mistakes.  Let your lender know that you are capable of regaining your financial health and can once again be a responsible homeowner.  Briefly mention your family, accomplishments and your commitment to home ownership.  Describe how things are different now that would enable you to make your payments if they were lowered, if this is the case.

That’s all for now.

Coming up in part 4 of this 6 part series, you’ll learn about  “Preparing Your Income And Expense Worksheet.


Call 888-766-3693 if you have any questions about modifying your loan.  You can also visit our loan modification company reviews.

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