Deciding on a loan modification program from your lender can be overwhelming. Many financial institutions offer a few choices towards modification, though most homeowners don’t understand the jargon within.
Most of the time the loan modification program selection that your lender will present to you will have at least two choices. The differences between individual programs lie in the interest reductions, principal deference, length of time your mortgage will be extended, and when the balloon payments will start. Needless to say, it can be difficult to choose one, though some aren’t available to everyone.
In order to decide on a loan modification program you need to find out what your needs are.
If you are going through a patch of financial hardship that you are sure will not last more than a year or two, it might be better to choose a program with a 5 year duration with a slightly lowered interest rate and a principal deference, if possible. Not every program offers a principal deference, and some lenders don’t offer it in any of their programs.
If there is no option for principal deference and you don’t foresee being able to afford your current mortgage rate anytime soon, a long-term (30 or 40 years), low rate program may be your best choice.
You can find out about your lender’s loan modification program selection by calling their loss mitigation department, or alternatively inquiring in person at a local branch. Getting the information is the easy part — getting the modification approved is the hard part.
Once you have decided on the program route you are going to take, you need to decide whether you are going to do it by yourself or get assistance from an FHA representative or modification company. Taking the task on your own or through an FHA representative is free, while utilizing the services of a specialization company can get pricey. It’s ultimately up to you to choose how you would like to approach your lender.
During the application process, you will have to write a hardship letter to send in with your application. The hardship letter is the pillar holding your application up, and it’s imperative that you include the right information. However, there are several sites online to get sample letters and if you work with a company or FHA representative they will assist you in writing it.
From deciding on a loan modification program to getting the modification, you can expect a six to ten week wait.
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