Important Facts to Consider with a Loan Modification

by tammy on March 1, 2010

When one is considering trying to get a loan modification to help with a mortgage or a past due bill, there are very important facts that he or she should keep in mind. Understanding the information provided in this article can mean the difference between getting the help one needs and wasting a great deal of time and money.

The first thing that one must consider is whether or not a loan modification really is the answer for his or her present situation. Many people use loan modification as a first choice, when in fact, it is more of a last resort. Individuals should try budgeting their money and getting financial advice from a professional if possible. If, after having done this, they still cannot seem to meet ends meet and pay off loans on time, then they may consider other options with the help of an advisor. Only after all other options and measures have been explored should a person think about going the route of a loan modification.

One of the reasons for this is the fact that in this tough economy, loan modifications are getting more and more difficult to qualify for and to obtain. This is due partially to how popular they have become, as banks and loan modification companies are overwhelmed with requests and applications.  If, however, one does decide to apply for one, he or she should be very careful during the application process. Even a tiny, seemingly unimportant error on the application form can make the difference between qualifying and not qualifying. If at all possible, one should fill out these forms with the help of an attorney.

Individuals should also be sure that they have an acceptable debt ratio as compared to their income ratio. A ratio in the proper realm, usually around the forty-five percent debt mark, shows that the individual will be able to pay off his or her loan by making regular payments on time. Many people do not understand the numbers and figuring that are involved in calculating one’s debt ratio, so a lawyer or another trusted financial professional is often one’s best bet in comprehending this invaluable data. Borrowers should also be sure that they can prove an inability to pay off their mortgage or loan. Those individuals who can not prove the existence of real financial hardship rarely qualify. Loan modifications are not, as a general rule, given to those who are living beyond their means and have simply put bills or mortgage payments on the back burner.

A loan modification is not going to help one escape the responsibility of paying off his or her mortgage. It may afford one a greater time span in which to do so or the option of making smaller payments, but it will not completely clear up the financial burden. Loan modifications do work, but they only work if the individual who has applied for one is a good candidate and will be able to meet the terms of the ammended agreement.

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