In today’s economy, there are countless ways where you may find yourself unable to make your mortgage payment. Thankfully, there are more options than having to foreclose on your home. One way is to apply for a loan modification to your mortgage. While many are familiar with refinancing, loan modification is entirely different and often leaves people with a lot of questions. Here an experienced loan modification attorney answers those questions and explains when hiring a lawyer is in your best interest.
Refinancing vs. Modification
These are several ways to avoid losing your home to foreclosure. Two of these are refinancing or modifying your existing mortgage. When one refinances their home, the initial loan is replaced with an entirely new mortgage. On the other hand, when one modifies their loan, the previous terms of the loan change.
How Loan Modifications Work
When you qualify for loan modification, the new terms restructure your mortgage to make it more affordable. Here we explain what those terms may be and who can be eligible.
Considering no two situations are the same, your lender may agree to one or more of these terms:
- Change from a variable interest rate (VIR) to a fixed interest rate (FIR).
- Extend the length of the loan.
- Forbear percentage of the principal balance.
- Reduce the interest rate.
Qualifying For Modification
Not every person who is having a difficult time paying their mortgage or is trying to avoid foreclosure will qualify for loan modification. Those who find themselves behind in their payments or will fall behind soon are more likely to qualify. Lenders will often take the loss of a job or spouse, disability, or illness into account. Your lender may also require you to submit documents such as bank statements, pay stubs, and tax returns along with the application. In the event your lender denies the request, you can file an appeal.
Things To Consider
Applying for loan modification is a complicated process and there are several options you should weigh before you decide it is the best course of action. Some things to consider include:
Possible Credit Score Dip
Whether or not you are approved for loan modification, even applying can lower your credit score. This change could make it more difficult for you to apply for future loans, but not nearly as much as a foreclosure.
Many times, your lender will grant you a temporary modification or forebearance in hopes your financial situation will change. If this is the case, lenders will require you to pay the deferred amount once you return to the original terms or add the unpaid amounts to the principal to be paid at the end of the mortgage.
Another common stipulation of a loan modification is that your mortgage term could be extended. This means that though you will have lower payments, your lender will require you to pay longer than your original agreement.
When To Hire An Attorney
Navigating the loan modification process can be difficult, which is why many people find it beneficial to hire an attorney with experience in the field.
People often find themselves in a situation where they’re not quite sure what to do or what their options are. Consulting an attorney allows you to discuss your case with an expert who can advise you of your rights and if loan modification is your best option.
Legal paperwork is always challenging to understand and filling it out wrong could cost you valuable time and money. Attorneys can walk you through the filing process and help you better explain your situation to lenders.
Though rare, there are times when lenders violate federal or state mitigation laws or state foreclosure laws. If you believe that your lender is infringing your rights by trying to foreclose on your property before they are legally allowed to do so, an attorney can stop the process, so you have time to file for loan modification.
Applications for loan modifications are not always approved. You have the right to file an appeal to their decision in most cases. Attorneys give your appeal more credibility by showing how the lenders made errors in their decision.
If you find yourself in a situation where you need a loan modification attorney, trust the Law Offices of Gary I. Handin, P.A. Our expert attorneys have been providing services you can count on since 1969! Call us today at 1-877-815-4560!