After 4 solid years of modifying loans for our homeowners and for ourselves we've sure figured out a great deal. Even though there won't be any guarantee that your particular lender will approve your mortgage modification request, we have identified a number of methods that will work regularly no matter what financial institution you happen to be dealing with.
1. The Hardship Letter: Your financial institution must see plainly that you are having a hardship. Give them a 1 page explanation of your hardship and the reason why it would help if your current monthly payment and/mortgage balance ended up being reduced. A hardship must be a scenario that is short-term like a loss of a job, 1 time expense, or an interest rate increase.
2. Debt to Income Ratio: demonstrate to your bank that a new reduced mortgage payment on the mortgage would cause a 31% or less of your current gross income. If the income is $5,000 a month, then your new loan payment you'd probably request is $1,550 ($5,000 x 31%). Next, compute just how much 90% of your gross income is ($4,500 in the above example) and also subtract the amount you figured out for the 31%. In the above example this will result in $2,950. This will be how much you have still left to pay for various other monthly expenditures, which in turn leaves you with 10% remaining. The 31% is your mortgage debt to income ratio and the 90% is the total debt to income ratio. Although this is not necessarily the hard and fast rule for all banking institutions, most use something very similar, so you must ask them so you can make sure you fit into those requirements.
3. Value vs. Mortgage: You need to demonstrate to the bank that they should provide you with a mortgage loan modification as opposed to foreclosing on your property. By demonstrating to them that your value is much less or equal to your present loan with them it gives them a reason to modify your mortgage. Utilizing an internet service such as Zillow you are able to look up comparable homes within your neighborhood to confirm the value of your own house. Print these comparables as backup and send them along with your initial loan mod application. The lender is certain to get their own appraisal but you need to have a clear understanding of your true value, especially when trying to discuss a principal reduction.
4. Determination and Followup: Making weekly phone calls and repeating yourself should become part of your schedule while trying to get a loan modification. It is not unordinary to provide the same information to several people at the same lender more than once before they get it. This is why it is advisable to not merely be constant but prepared. When you are in the process of modifying your loan it will switch hands repeatedly at the bank and each department may request new documents. Provide that information in a timely manner and track every phone call, fax, and conversation you have with the bank. You will need this should the bank not receive something you have delivered or accuse you of not delivering what they asked for and turning down the application.
For FREE hardship letters that you need to get your a loan modification approved the first time click here: Loan Modification