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Home Loan Modification: What Is It?

Home loan modification refers to the restructuring of mortgages for borrowers facing financial hardships, enabling them to pay off their home loan payments. In this arrangement, home owners work with their lenders to change the terms of their home mortgages, saving their homes from foreclosure. At the same time, lenders are able to recover their money in a restructured program.

Home loan plans fall under the US government’s Home Affordable Modification Program, which was unveiled in February 2009. This program was aimed at reducing the monthly mortgage payments of struggling home owners to sustainable levels. In view of this, home loan modification programs have to conform to the standards set by US government.

Mortgage modification is an effective tool for you if have fallen behind on your home loan payments and are faced with financial hardships. As the loan is restructured to make it more affordable, you are able to pay it off without losing your home or sinking into debt. Key aspects of the loan such as interest rates, monthly rates and any penalties incurred are changed, enabling you to pay off the loan from your available income. However, in order to enjoy all the benefits of mortgage modification, you need to qualify for one.

The following qualifications make you eligible for a mortgage modification.

One of the qualifications for home loan mod is that one must have originated his or her home loan prior to January 2009. This requirement was put in place in order to prevent opportunists from taking advantage of the program. You must also be the owner-occupant of your home. The other qualification for home loan modification is that you have to owe more than your home is worth. According to the US treasury department, a person with a mortgage balance which is higher than the home’s current value may qualify for home loan modification. Another qualification is that you need to prove that your current financial status has suffered significant hardship. This could be as a result of various conditions such as increased mortgage payments, medical bills or reduced income. At the same time, your monthly mortgage payments must exceed 31% of your gross monthly income.

Lastly, you need to prove that you can afford to pay the proposed monthly installments after the mortgage modification. Keep in mind that the reason for the modification program is to enable you to pay your loan, not to exempt you from paying it. In view of this, if you cannot afford to pay the proposed installments, you will not qualify for the home loan modification plan. This requirement ensures that people who knowingly took home finance that were beyond their means will not take advantage of the program.

In addition to the above mentioned qualifications, you also need the following information in order to qualify for mortgage modification. You need to provide information about your monthly gross income and assets. Further, you also need to provide information regarding your recent tax returns. You will also be required to provide account balances and monthly payments which are payable on all your credit cards. You should also present information on monthly payments and account balances of any other debts you may have such as car loans.

Finally you need a letter detailing the circumstances that led to the reduction of your income or increase in expenses. Once you have gathered this information, you should contact your lender in order to be considered for home loan modification. The lender will then assess your financial status in order to determine whether you qualify for loan modification.

You may need to hire legal counsel for guidance in the process, to help you negotiate for the best possible terms. You can get a list of approved housing counselors form the US Department of Housing and Urban Development just to be sure.

Non-Conforming Home Loans – A Great Option for People With Default History

In the past, lenders considered default history as the most damaging thing for a home loan. They rejected home loan applications of people with defaults in the past. But, today the condition is different. Fortunately, there are some lenders and credit providers who offer home finance to people with default history. Such loans are called non-conforming home loans.

Non-Conforming Home Loans

Non-conforming loans are the same as regular home loans. But, owing to the extra risk involved, you will most likely have to pay an increased interest rate.

The Criteria to Get a Non-Conforming Home Loans

Such loans are only available if you can meet the following criteria:

1. You should not be in bankrupt or taking advantage of a part 9 creditor agreement within the Bankruptcy Act. (You can however apply for a such loan the day you receive your discharge from such restrictions).

2. You need to put together a minimum deposit of 20 per cent (or have 20 per cent equity in the property that you want to refinance). The maximum loan amount is 80 per cent of the property value. However, any First Home Owner Grant (FHOG) that is available to you will form part of your deposit

3. 20 per cent deposit is mandatory even when you have a guarantor. Likewise, it a large salary will not give you relief from the deposit amount.

4. You will be required to find money to pay any stamp duty and other costs that outside the loan allocation funds.

5. You should have sufficient ongoing income to service the loan repayments. (Usually people on pensions or those who are unemployed cannot obtain a non-conforming home finance).

What Information should be provided to a Non-Conforming Lender?

Lender will look at all the red flags in your credit file. So, if you try to hide something from the lender, you will not improve your ability to get such loan. In fact, you will simply make the lender more suspicious. It may also lead to your application being declined because you were not transparent enough or fully honest about your circumstances. So, be transparent and open about each and every entry appearing your credit file.

So, next time you venture to out to get a non-conforming home loan, remember to be clear about your financial details. Do keep in mind the other points mentioned in this article. It will ensure stress-free approval.

Getting the Best Bad Credit Home Loan Easily

Even with the economy being what it is these days most people are finding it easy to get a home loan with bad credit, whether it is a 1st mortgage or a refinancing. You can get a bad credit home loan from a variety of mortgage lenders including banks, credit unions, mortgage companies and you can even get them online.

Whether you’re a first time lender or a homeowner with bad credit looking to refinance or get an equity loan you should take the time to shop around to different home loan lenders. Get a quote from each one that you find as they will differ, sometimes dramatically. Compare the rates to find the best one and don’t stop there. Once you’ve done your own research you can even contact a mortgage broker who might be able to get you an even better bad credit home loan. Mortgage brokers have extensive contacts and they specialize in getting mortgages for all types of borrowers.

A mortgage broker has one job and that is to match borrowers with lenders. They typically have access to many different mortgage lenders and will be able to get a wide variety of loan options for you. If you’re working with a mortgage broker to get a bad credit home loan ask questions. Find out what the current rate is and what the lowest quoted rate for the day is.

Don’t just accept a loan because of the monthly payment. Find out what the terms of the loan are and find out what your options are. By asking about the complete terms you’ll find it easier to compare different home loans. You should also be asking about current interest rate options. Are they offering you a fixed rate mortgage or an adjustable rate mortgage. If you get into an adjustable rate mortgage it will be cheaper initially, but if interest rates rise you could be in for quite a shock several years down the road.

You’ll also want to make sure you ask about the down payment required on any home loan. When shopping for bad credit home loans it’s not unusual to be faced with a 20% down payment requirement. Get this information and know how much you can afford.

By comparing rates and quotes from several home lenders you’ll have the best chance to get a bad credit home loan that meets your needs. Don’t agree to any loan where you don’t understand the terms completely. Take your time and try working with a mortgage broker who will answer all your questions without pressuring you. You should feel completely comfortable with the terms and rates of any home loan before agreeing to sign the loan.