wordpress hit counter

The Steps To Take When Applying For A Loan Modification

applying for a loan modificationIn a previous article “How Can A Loan Modification Help Homeowners?” we covered the basics of what a loan modification is and how it benefits you if you are having trouble making mortgage payments.

In part 2 of this series we’ll take a look at the steps to take when applying for a loan modification.  The process itself can be time consuming.  But taking the time to do things right and thoroughly can increase your chances of being approved.

Step 1

Contact your lender and ask for information on specific guidelines they may require in order for you to be approved for a loan modification. This is very important to know before you proceed to the next steps. Do not ask to qualify at this point, only ask for the guidelines!

Step 2

You will need to write what is called a “Hardship Letter.”  This letter should explain what are the specific circumstances are causing your financial problems. Also tell your lender what you’re doing to try and get your finances in order.  Remember, you’re having trouble paying your mortgage so your lender needs to be reassured that you are serious and are committed to making changes.  They want to see specific dates of when things happened to you and how this affected your ability to pay.  Anything that causes you financial stress can be used as a hardship here.  Loss of wages, unexpected medical bills, your interest rate went up – are all good examples of hardships.

Step 3

Get all of your bills and expenses together.  Take a look at where your money is being spent.  See what expenses can be eliminated. For example are you going out to dinner several times a month?  Do you really need the premium cable package? Create a new household budget without these kinds of expenses.  This shows your lender you understand the gravity of your financial situation and you’re taking steps to make needed changes.  They also require you to submit an income and expense worksheet.

Important – The income and expense worksheet should show your income minus your expenses each month.  It is a very important part of the approval process.  Most guidelines want you to be around breaking even to get approved.  This means, if you subtract all your expenses from your current income, you are left with nothing each month.  Somewhere around $100 over or under this benchmark is also acceptable.  You cannot make too much money or too little money and this is why most homeowners get denied.

Step 4

Go above and beyond other homeowners, gather some proof.  It’s not enough to just tell your lender you’re in over your head financially.  You have to provide proof to back up what you are claiming.  What kind of documentation varies with each homeowner.  If you lost your job for example, you could provide a letter from your previous employer. Even if you’re still working and due to cut backs your salary was reduced, again a letter from your employer would be needed.  If you have medical expenses not covered by your insurance, make copies of your medical bills to show your lender.  This will add credibility to your hardship letter.

Step 6

One of the most common reasons  homeowners are not approved for a loan modification is because they failed to fill out the paperwork completely and accurately.  Your lender already knows you can’t make your current payment.

But the lender also needs to be certain that you will be able to make the mortgage payment even after you’ve been approved for a lower payment.  A lower payment does not automatically mean you will be able to make your payments. Providing “before” and “after” financial statements must show that you will be able to make your new lower payments if you are approved for a loan modification.

Step 7

After you prepare all this paperwork, you can then call your lenders loss mitigation department.  Tell them you want to see if you qualify for a loan modification.  Usually, they will ask you a series of questions, most of which applying for a loan modificationpertain to your financial statements.  Just read them off your income and expense worksheet so every will match perfectly when you turn it in.  If accepted, they will ask you to then send this packet in.

Step 8

Now is the follow up part.  Remember, “the squeaky wheel gets the greasin’”! Once a week, call up your lender to check on your file.  Ask them, “Is there anything you need from me this week to help with the loan modification process?  Is all the paperwork in my packet still current?” and other questions like these.  If you do need to submit any more paperwork, they will let you know.  They will also note in your file your phone call records and see that you are actively pursuing the modification.  Just remember, never get upset with the person on the other line – even if you are getting angry.  They get many phone calls a day from angry customers, so it is best to try and stay on their good side.

A Final Word Of Encouragement

You may feel like it’s too much to deal with, but if you don’t deal with it… you run the risk of losing your home.  So now is not the time to give up!

You can do this!

Part 3 of this series will cover one of the most important steps to getting approved for a loan modification.  “How To Prepare A Hardship Letter” will define what a Hardship Letter is and how to write yours to increase your chances of getting your loan modification approved.


Call 888-766-3693 if you have any questions about modifying your loan.  You can also read our loan modification company reviews if you decide to use help for this process.

One Response to “The Steps To Take When Applying For A Loan Modification”

  1. Banja Vrujci says:

    I was able to find some very good advice from your post. Thank you.

Leave a Reply