Credit Report Blog
Website CertifiedPrivacy Protected

Is it time for me to modify my home loan?

By Ruth Racey
Published: Friday, October 23rd, 2009

Obviously, it is impossible to have a stable amount of income or a steady house payment for a long time. However, in case you are beginning to experience something like that now, you can apply for a mortgage loan modification right away.

Call your lender and ask for help if you are having problems meeting payments every month. Doing this might help you get a better deal with more favorable terms, or ask them directly for a home loan modification. 

Loaners would most probably presume that your request was due to a drop in income. They usually base their findings on the client’s financial background. They might notice that you can still manage to pay the monthly mortgage, but unless you inform them, they would not know you are experiencing a financial setback. They may consider loan modification if they find mortgage payments that are more than 31% of the client’s income.

Therefore, you really need to call them, but you should first think it over carefully. If you are expecting your salary or income to rise again in the next couple of months, then calling them would not be a good idea because your status will become public knowledge to loaners and this could affect your right to borrow from them. It could also have an effect on the interest rates and credit limits of the credit cards you have now. Once they perceive you cannot pay them anymore, they will take a hold of anything they can so they can still earn before you stop paying.
So consider these things first before you act.

If you qualified for a modification, do not start rejoicing yet. Those who have been granted home loan modifications would undergo a 3-month “probationary period” where they should keep their mortgages up to date. Only after then will the loaners finalize the modification.

The program is set to be effective for 5 years, and then the terms will revert to pre-modification period. Within the 5 years, it is an obligation for participants to sign a 4506 T form, which enables the lender to review their IRS returns. If the returns showed a large increase in the client’s income, terms would be reverted to pre-modification status.

If you pursue having loans modified, it will surely have a negative effect on your credit score. Moving away from the initial terms of a mortgage would be reported to the three major credit bureaus, so again, you have to mull on it repeatedly.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.