Facts to debunk your myths and misconceptions on mortgage modification

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By: Renee Brown
on 22nd Dec,2013

Mortgage modification is an excellent option that can help you protect your home from foreclosure activity in the US.
Facts to debunk your myths and misconceptions on mortgage modification


Mortgage modification is an excellent option that can help you protect your home from foreclosure activity in the US. Loan modification helps to provide temporary as well as long term relief. Mortgage modification can help lower the monthly payment by lowering the interest rate, by extending the loan terms, or even by reducing the principal balance. For instance Michigan is one of the 18 states that received federal money from the Hardest Fit Fund (HFF). This fund is actually designed for the homeowners who are unemployed or facing foreclosure. In this situation, you may receive funds to pay off the second lien loans as well as lower the existing mortgage.


Here are some of the programs that you can consider to check whether or not you qualify for mortgage modification:

Home Affordable Refinance Programs (HARP): You can get mortgage modification at affordable rates if you haven't defaulted on your payment but failed to get a traditional financing.    

Home Affordable Modification Program (HAMP): This program is beneficial for the homeowners to refinance their mortgages with affordable monthly payments. Well, the homeowner can qualify for the program only if he can demonstrate that he is facing financial hardship. The home of the applicant requires to be the primary residence. According to the recent changes in the legislation, if the homeowner entered a HAMP trial period but defaulted on his payment, then he is still eligible for the program.

Home Affordable Unemployment Program: This program helps to lower your payment to 31 percent of your available income. However, in special cases, the payments can be suspended for up to a year or so.

Second Lien Modification Program: The homeowners of Michigan, who already modified their first loan under HAMP can avail a second loan modification as well. You can be eligible for the program if you've not missed three consecutive monthly payments on the modified mortgage.


Before applying for a mortgage modification, it's really essential for the homeowners to clear their misconceptions associated with mortgage modification.

Unveiling of the mortgage myths and misconceptions:


A large number of people in the US are not aware of the reality associated with a mortgage modification. You can read on to debunk the myths and misconceptions associated with mortgage loan modifications.


Here are some of the facts that you can consider if you’re skeptical of modifying your mortgage loan in the US:


1) Are you required to be late on your house payment in order to qualify for a modification?


No, this is a misconception. The US Treasury Department states that mortgage lenders get incentives to modify loans if the borrowers are still current on their payment. Therefore, if you deliberately fall behind your payment, it can adversely affect your credit score.


2) Is the loan required to be a Fannie Mae or Freddie Mac loan to qualify for mortgage modification?


This is a common myth that the loan is required to be backed by either Fannie Mae or Freddie Mac to qualify for a loan modification plan. Well, this is not true. The loans are not required to be backed by the loan giants to qualify for a loan modification.  


3)  Can filing for bankruptcy prevent you from getting a loan modification?


The consumers may be under the notion that bankruptcy filing can prevent them from qualifying for a loan modification. In reality, you can still qualify for a mortgage modification while going through bankruptcy. In most of the cases, the lenders may agree to negotiate modification during bankruptcy and it may help to lower your own losses.


4) Is it possible for the unemployed to get a modification?If you receive unemployment benefits, then the lender may consider it while determining your income and reviewing your qualifications for a mortgage modification. According to the Home Affordable Modification Program (HAMP) guidelines, if the borrower receives public assistance, he is required to provide documents like benefits statements that state the amount, frequency as well as the duration of the benefit.


5) Can you apply for a loan modification on investment properties?


If you’ve the capability to pay back the mortgage modification loan on time, then the lender may not reject the application for a mortgage modification on investment properties. So, you can apply for a loan modification on an investment property.


Now that you’re aware of the facts, it’s better to acquire genuine information instead of having misconceptions and myths about loan modification. You can check various mortgage modification programs that can be beneficial for you.   



 

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