The truth is that you won’t know whether you qualify until you actually apply for the loan modification and discuss the possibility with us or your lender. The best that this short answer can do is to reveal the types of information the lender is likely to examine in reviewing your application:
- A statement showing your willingness to keep your house. Your lender wants to see that you are committed to a long-term solution.
- A hardship letter describing the event that has made your monthly mortgage payments unaffordable. Hardships can include loss of job, reduction in pay, medical illness, costly medical bills, a sudden and significant interest rate increase on an adjustable rate mortgage (ARM), and so on. This needs to be from 1 to 1 1/2 pages long and be detailed. This is the most important document you will present.
- Your ability to afford a reasonable lower monthly payment. Lenders have all sorts of ways to lower your monthly payment, including dropping the interest rate, spreading payments over a longer time period (say 40 years rather than 30), reducing the balance due, forgiving late payment penalties and fees, and rolling missed payments into the balance due. If the lender is unable or unwilling to reduce the monthly payment to an amount you can afford, you won’t have a successful loan modification – nor would you want to. Please note that it is extremely rare for a lender to reduce the principal on your loan. Lenders will typically encourage you to
To determine whether you qualify for a loan modification, most lenders are going to take a close look at your front-end debt to income ratio (DTI) – your monthly Principal, Interest, Taxes, and Insurance (PITI) divided by your gross (before taxes) monthly income.
Front-End Debt Ratio = Total PITI / Gross Monthly Income
If your front-end DTI is currently at or below 31 percent of your gross monthly income you need to calculate your back-end DTI. You may still qualify for a loan modification if your back-end DTI is above 55 percent. The back-end ratio consists of all your debt payments (including house payment, car payment, credit card payments, and so on). If you have a high back-end DTI your lender may be willing to modify your loan after you have completed a credit counseling course.
Although your lender may have different guidelines, the FHA recommends that your back-end ratio not exceed 41 percent and your front-end ratio not exceed 29 percent. This is a pretty good guideline to follow in determining whether your new, lower monthly mortgage payment will be truly affordable.
A more conservative approach to calculating debt ratios is gaining some support. It involves generating the DTI using net pay instead of gross pay – in other words, basing the calculations on your take-home pay. This makes sense – after all, the only money you really have to spend is your net take-home pay, not your gross pay. You probably won’t see this new approach gain nationwide support, because it would further tighten lending restrictions and disqualify many would-be borrowers, but it is out there and something to be aware of. Personally, it’s what I suggest people look at when applying for any credit, especially when considering a major monthly payment like a mortgage.
Remember: You want to qualify for a loan modification only if the modification is going to leave you with a truly affordable monthly mortgage payment. You don’t want your lender qualifying you if the loan modification is simply going to put you back on the path to losing your home.
Contact us now at 949-713-0843 and a Loan Modification Professional will help you get started.
How do I qualify for WFB Legal Consulting to represent me for a Loan Modification? What criteria must I meet to be considered in a “hardship” situation?
In order to be eligible for a Loan Modification and have WFB Legal Consulting represent you we must be able to prove to the lender that you are a victim of a “hardship” and therefore unable to continue making payments on your mortgage. A hardship situation is one that is the result of some extenuating circumstance that forces the borrower into a position where they can no longer afford their mortgage payments. While every situation is different, some frequent examples of hardship include:
- Decrease in the value of the home
- Unemployment or loss of primary income source
- Inability to work due to health crisis
- Mounting medical expenses
- Employment relocation
- Failure of business
- Bankruptcy
- Death of spouse or significant other
- Divorce or separation
What do I need to do to get started?
In addition to the homeowner proving hardship, lenders require a specific set of supporting financial documents to consider a Loan Modification.Contact us now at 949-713-0843 and a Loan Modification Professional will help you get started.
When should I begin the loan modification process?
Immediately, foreclosure and loan modification situations tend to be extremely time sensitive and consuming for negotiations. The sooner we can begin the negotiations with your lender, the greater the chances of a successful resolution. There is no need to wait until the lender sends you a notice of default or initiates formal foreclosure proceedings against you. Time is of the essence!Contact WFB Legal Consulting today at 949-713-0843 and one of our Professionals will help you get started.
How long does a loan modification typically take to process? May the process be expedited if I am facing foreclosure or an auction date has been set?
All loan modification situations are unique and follow their own timeline. Typically a loan modification is completed within one to 2 months from the time we have a complete loan modification package ready to present to the lender. The timing depends on how fast we can begin negotiating with your lender. If you are imminently facing foreclosure or even if an auction date has already been set, the process can certainly be expedited and we may even have the lender postpone the auction date.Contact us now at 949-713-0843 and a Loan Modification Professional will help you get started.
Why would my lender agree to a loan modification?
In most distressed mortgage situations, foreclosure is a last resort for all parties involved. The homeowner and the lender usually want to avoid foreclosure at all costs. That is why a loan modification is advantageous to foreclosure and lenders are typically very motivated to pursue a loan modification prior to foreclosure.
A loan modification gives the lender the ability to cut its losses upfront thereby avoiding the expense and time of a foreclosure and potentially greater losses. Lenders want to make loans; they do not want to be in the business of owning and managing real estate. Whether the lender chooses to go through with a foreclosure or agree to a loan modification, they are taking a loss either way, but in many cases they would take less of a loss with a loan modification and resolve the matter in a comparatively shorter time frame. In nearly every case, a loan modification offers a significantly better return on the lender’s investment than a foreclosure does.
Contact WFB Legal Consulting today at 949-713-0843 and one of our Professionals will help you get started.
Does WFB Legal Consulting operate nationwide?
Yes. Regardless of where you are located, we can help. We operate in every state and have a comprehensive understanding of all the ins-and-outs and rules and regulations applicable to each foreclosure situation.
Contact WFB Legal Consulting today at 949-713-0843 and one of our Professionals will help you get started.
Why should I use WFB Legal Consulting to help me?
WFB Legal Consulting is a national leader in the field of loan modification negotiating. Our principals and affiliates have over five decades of combined experience in all areas of the mortgage and real estate industries. Our expert loan modification professionals are highly trained in this often complicated process. We operate in every state and have a comprehensive understanding of all the ins-and-outs and rules and regulations applicable to each foreclosure situation. Our decades of expertise and experience differentiates us, our commitment to our clients is our mission. It is this unique combination of industry-leading expertise, impeccable professionalism, and extraordinary customer attention which enables us to offer the highest level of service to our clients nationwide.Contact us now at 949-713-0843 and a Loan Modification Professional will help you get started.