It is increasingly common for people to look into home loan modifications this day. The real estate market is still quite volatile, which means people are looking for better deals, or options that cost them less. Refinancing used to be the traditional method of doing this, but Golden State Financial Group has found that there continue to be a lot of people in negative equity, which means this is not an available solution. That said, the home loan modification needs to be taken seriously and not seen as a quick way out of some financial distress.
Golden State Financial Group Explains Home Loan Modifications
Two key types of modification programs exist and they have different application and acceptance criteria. The first is an in house modification, which means you must follow the guidelines as set by your lender. The second is the Making Homes Affordable Program, whereby a lender has to lower what you pay each month to no more than 31% of your gross income.
How Making Homes Affordable Works
Lenders have three key ways in which they can lower payments to 31% of your income:
Reducing the interest rate. This is the preferred method, because it is quite easy and means you still pay back the principal and some interest. Some lenders will lower the interest far below the current standards.
Extending the home loan term. Because interest rates are still at historical lows, reducing the rate may not be enough. Instead, they will extend the term. They could add an extra 10 years to the overall mortgage. While this does mean the borrower has to make payments for much longer, those payments become more affordable and everybody is happy.
Reducing the principal. This is very rare, but it means that the lender agrees to essentially write off some of the money that is owed. Naturally, it is a last resort option for the lender.
There are millions of people who need a home loan modification. Unfortunately, only a few thousand have been able to qualify. One of the reasons for rejection is because many people already have mortgage payments that are less than 31%. This is one of the few situations, therefore, where having a high debt to income ration is the best way forward.
If you want to apply for a home loan modification, you may consider enlisting the services of a company like Golden State Financial Group. They have a lot of experience in helping people be accepted, as they understand what lenders are looking for and what is realistic or not. In so doing, they have helped many Americans to avoid foreclosure. They will help contact the lender, write the necessary hardship letter, provide the paperwork, follow up on progress, and more.
Too many people continue to hope that if they simply ignore a problem, it will go away. The reality is that this head in the sand attitude could cost you your home. Before that happens, consider a home loan modification.