Loan Modification

Loan Modification Applications, What Are Lenders Looking For?

By Andrew

Loan modifications are often presented to us as a murky, obscure and scary financial world of shadows where normal people like you and me should not even dare to tread without the faithful advice of an expert, or preferably two, for fear of being swallowed up by an ARM, or something worse, hiding behind the bushes. Fortunately, although there is some truth in the previous depiction, we can understand the mechanics behind loan modifications and work with along with a trusted expert without playing the part of the helpless victim.

Lenders, like most predators, are simple creatures; they just use complicated jargon and scary formulas as a smoke screen. Lenders are only interested in two things: your hardship and your income, which when you really think about it, is the same thing.

This is one of the dirty secrets of loan modifications, unfortunately there are many, but this is a big one. Lenders are only interested in what you can afford to pay. If you can?t afford to pay any reasonably priced mortgage they are not interested in you as a client and will foreclose or short sale your home before you can say Jack Robinson.

Therefore, it doesn?t take a rocket scientist to realize that it is of vital importance to present yourself to your lender in the right financial light to stand a chance of success. This is tricky. You need to be able to prove there is no way you can afford the current mortgage payments while establishing without a shadow of a doubt that you are a perfect candidate to a modified loan with lower monthly payments. Get that right, and you have just increased your chances of success beyond recognition.

How do you get it right?

The key is to understand your enemy – I mean your lender. You must see through his eyes and understand how a lender calculates your income. The way lenders calculate your income when assessing your loan modification application is different to the methods used for traditional home loans. Surprisingly, this is good of thing, because guidelines are set in your favor.

The first step is to write a hardship letter deserving of a Pulitzer Prize, more on that later. Second, you must prove you do have the income to pay for your modified loan. The first step disqualifies you from your present loan, while the second is designed to qualify you for your new one.

When you calculate your income for a loan modification you can use any income, that you can prove, of course. And I mean any, it doesn?t even have to be completely legal, as long as you can prove it. For instance you can include income from a second job you get paid for? let?s call it informally, without a problem. You can include your grandparent?s SSI, or your spouse?s income, even if they aren?t on the mortgage, just as long as you can prove it.

Proof must be provided in the form of bank statements, 1099 forms or in some other documentable form. The specific guidelines change and will be detailed in your submission paperwork. All this evidence of your income is the backbone of your loan modification application, get it right!  You will need it to write an effective hardship letter and to pass the NPV test, both of which you need to do to qualify for a loan modification.

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Related posts:

1. What Is A Loan Modification? The Three Keys To Loan Modification Success
2. Loan Modifications, NPV Test the Key to Loan Modification Success
3. NPV Test, Your Personal Loan Modification Sword of Damocles

1. What Is A Loan Modification? The Three Keys To Loan Modification Success
2. Loan Modifications, NPV Test the Key to Loan Modification Success
3. NPV Test, Your Personal Loan Modification Sword of Damocles

Full post as published by Blown Mortgage on February 15, 2010 (boomark / email).