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Loan Modification Tips To Increase Chances of Approval

loan modification tipsIf you’re considering a loan modification to keep your home from going into foreclosure, now is an excellent time to begin the process.

It may seem like a daunting task at first.  You may even feel overwhelmed and have no idea where to begin.  But the most valuable loan modification tips center around providing the proper documentation.

In order to increase your chances of getting approved it is absolutely imperative that you provide all of the documentation the lender requests.

Be Sure Your Application Is Complete

This may seem obvious to most, but it’s common that someone will fail to fill out their loan modification application completely.  This can grind your application process to a screeching halt.  In some cases your application can be denied.  Double check your list of required paperwork and make sure you have sent it all in.

What Documentation Should You Have?

  • Hardship Letter
  • Documents to back up your financial hardship claim.
  • Federal income tax returns and W-2′s for the last 2 years (This can be obtained electronically once you give permission by filling out the required form)
  • Pay stubs
  • Income Expense Worksheet

This is by no means a complete list.  It is provided to give you as a general idea of the kind of documents you will be required to have.  You should consult with your lender for a more complete list.

Before You Apply Make Sure You Know Your Debt Ratio

A homeowner must be able to prove to a lender that their mortgage payments are too high and they are struggling to make them. Without a modification to their existing loan they will not be able to pay their mortgage unless payments are reduced.  To show your lender this, you need to calculate your debt ratio vs your current income.

Don’t worry it’s not as complicated as it sounds.

To qualify, your “housing debt” has to be at least 31%  or more of your income.

To calculate that amount just add…

Your Current House Payment + Taxes+ Insurance + HOA fees (if applicable) / divided by your Monthly Gross Income.   If you are somewhere around breaking even or slightly losing money/gaining money you are right where you want to be when you turn in your financial statements to your lender.  For example, if we did all these calculations and ended up at -$113.98, we would be right within most lenders guidelines.  If you did the calculations and ended up with +$1905.43, we are way positive and would most likely not qualify for a loan modification.

If you are thinking about “fudging” these numbers to get them to where they need to be, think real hard!  Your lender will have access to a lot of your financial information during this process.  They will have access to your credit report.  They can see all the exact amounts you are paying to your debtors.  If you do get the desire to “fugde” the numbers, you better make sure it’s something that’s not on your credit report.  While most lenders will not have to time to comb through your financial reports like the IRS, they will check the major expenses to make sure they all line up with what you told them.  Getting caught in a lie is not going to help you get approved.

Use these loan modification tips to prepare yourself before you actually start the process.  The more information you have upfront… the better and more quickly you can get approved.

If you have questions about loan modification, just call 888-766-3693 or visit Loan Modification Programs for more information.

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