Many homeowners mistaking think that that they may not qualify for a loan modification because they are behind with their payments or have no equity. It is the refinance mindset as I call it- ‘I am never going to be able to refinance my home, so I definitely won’t qualify for a modification’. This is not true. A loan modification is not only for reducing mortgage payments. In fact, the primary reason for a modification is too help homeowners avoid foreclosure. However, ancillary benefits include a lower interest rate, a lower payment and sometimes a principle reduction of the outstanding balance of the loan. In addition, if you are currently late with your payments, upon completion of the modification, you will be brought back to current. It’s like a fresh start.
Allowing your home to go into foreclosure, on the other hand, can have devastating effects. If you absolutely decide that you do not want to stay in your home this should still not be an option. Abandoning your home does not mean you are absolved from the liability. Eventually, the bank will sell home at auction so that the proceeds can be used to satisfy the existing debt. Now, here is the problem. Many times the proceeds from the sale are not enough to fully pay off the existing lien on the property. The remaining unpaid balance now becomes a judgment that will stay attached to homeowner’s credit indefinitely.
The alternate solution would be a short sale agreement, or deed in lieu. Basically, these agreements are just an understanding between you and your bank that you are going to surrender the property and in exchange, they will not come after you for the deficiency balance once the property is sold. It is not a foreclosure and you can make a clean break from the property without any repercussions.
If your intent is to try and stay in the home, consider a mortgage modification. Your credit, income and home equity are not evaluated in the same way that they are for refinance. A modification is not only for reducing your payments, it is designed to save your home and bring your payments back to a current status. With recent changes, it is now easier than ever to do a modification on your own. You just need some basic knowledge about the process and how to present yourself in the best possible way to get an approval. A do it yourself loan modification guide, will walk you through the process and ensure that you have the best possible outcome.
The cost of foreclosure vs a loan modification can be significant if you don’t consider all of your options. The first question you should ask yourself is ‘do I want to save my home’. If the answer is yes, explore a loan modification today.
J. Pisicchio is a mortgage professional with 20 yrs industry experience. Working at small banks & large institutions (Chase), he was formally trained as a credit analyst. His goal is to help consumers make the best financial decisions regarding their mortgage needs. For information on the Do It Yourself Modification guide, visit www.mortgageloanmodificationsecrets.com
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