The Federal Government has set aside $75 billion dollars to help struggling homeowners with a loan modification program so they can avoid foreclosure. The goal is to help 5 to 6 million families get a lower mortgage payment so they can afford to stay in their home. This plan is not for everyone-find out if you may qualify for help by learning the formula your bank will use. Who qualifies for this loan modification program
Here are some general guidelines for basic eligibility for this program: You must live in the home as your primary residence. Includes second mortgages.. You must be able to prove your income. Your current house payment must equal 31% or more of your gross monthly income
You do not have to be delinquent to apply for this loan modification program.. No charge to apply-Free loan modification program
Your loan must have been taken out prior to January 1, 2009. Loan amount is less than $729,750
Facing a financial hardship situation
How do you apply for the Home Affordable Modification Plan and what is the approval process? Interested homeowners need to begin gathering the required paperwork and completing the required forms. Borrowers must be able to prove that they are facing financial hardship, detail their income and expenses clearly and provide all of the necessary paperwork to be considered as a candidate.
What are the primary features that will be offered to qualified homeowners to arrive at an affordable payment based on 31% of their gross monthly income? Reduce interest rates to as lower as 2%. Extend loan terms to 40 years
Principal reduction with the Government sharing in the costs with lenders. What is the formula the lenders will use to determine who qualifies? Arrive at a target payment by multiplying the gross monthly household income by 31%
Subtract the monthly costs for homeowners insurance, property taxes, and any homeowners dues = the new principal and interest payment. Using the current loan amount, reduce the interest rate to as low as 2%, extend the term to 40 years and if necessary defer or forgive some principal balance to achieve the target payment
If the target payment can be reached using the standard methods of modification, then the homeowner is a good candidate for assistance.
While this loan modification program is voluntary, most lenders and servicers are expected to participate. The Federal government is offering financial incentives in the form of $500 payments to servicers and $1500 to mortgage holders that offer a loan modification program to their borrowers as well an annual payments. In addition, homeowners who stay current on their new modified loan will be given a monetary incentive for each year they remain current, for a total of $5000 at the end of 5 years.
A successful homeowner will understand what paperwork will be needed to submitted to their lender and, just as importantly, how to complete their paperwork properly so the loan modification application is processed quickly. You can use the very same formula your lender will use to pre-qualify yourself and adjust your budget before the bank reviews your application. Do you know how to figure your own debt ratio and determine your new target payment? This is critical so that you can make any necessary adjustments to your monthly budget in order to fit into the approval guidelines.
The good news is that successful borrowers will also be given a financial incentive for keeping their new modified loan current. The incentive will grow for each month that the payments are made on time, with a possible $1000 bonus that will be applied directly to their mortgage balance for each year the payments are current, for a totoal of 5 years. Now is the time for financially strapped borrowers to begin learning more about how to qualify for this loan modification program and submit their paperwork for approval. Help is available for borrowers who know how to get it-make sure you do everything you can to save your home.
The above three tips can help you make the best of the modification loan process but you can get even better results if you use the services of a loan modification company. They’ll assist you drafting an effective hardship letter and presenting a compelling on your behalf. I highly recommend obtaining a free loan modification evaluation in order to determine the best course of action based on your financial situation.
Learn more about Obama Mortgage Relief Plan Qualifications.
