When applying for a loan modification, be prepared to disclose your entire financial life to whomever is negotiating your modification. If you try to do it, you will fail, unless you are persistent, or insane. Some attorneys require $3000 up front retainers to even begin negotiating with the bank. There is no guarantee that it will work.
How Can I Qualify?
More than 60% of you do not qualify because a simple modification of your loan will not bring your financial position in line with the bank’s requirements. So what are those requirements? The lenders are simply looking at your finances to determine if your mortgage payment exceeds roughly 31% of your net take-home pay. This is an estimate, and every case is different, but it’s typical.
That means that if you have bad spending habits, or you’re paying bills that should be considered secondary to your mortgage before you pay your mortgage, your lender will call you out on it during the loan modification process. You may need to prioritize your spending.
So, regardless of your monthly mortgage payment, if it’s less than 31% of your net take-home pay, you will probably be denied. So don’t waste your time.
Loan modification typically results in a lowered interest rate, 10 years of additional payments on your home, payment deferral, or some other manipulation that will usually not help you anyway.
The real problem is that you owe money on a house that will not recover its value in enough time for you to break even on the future appreciation of your house, and therefore, you’re stuck in that house. If it comes time to move, you’re still stuck in a situation where you may have to do a Short Sale to sell the home.
The real truth about loan modification is that it’s possible, but it pacifies the homeowner long enough for the bank to continue to make money off of your financial hardship. Think about it. The bank wants you to be enslaved to their madness for as long as possible. At the same time, the banks are out of money and are going bankrupt, so your best option at this point in time may be to do a Short Sale.