There are many reasons why an individual might need a loan modification. It can be due to financial hardships or even to avoid a foreclosure, but it is important to have the right knowledge so that your loan modification is successful. Here are a few
Use a Counselor
A counseling service can help the homeowner be represented when it comes to making an offer on the loan modification. While this isn’t a requirement, if you are unsure of your options and need help, a counselor will help you out and even offer counteroffers to the lender. A counselor is there to help you be honest, so don’t try to inflate your costs each month in order to try to get a better deal. You need to be truthful and provide an accurate budget so that you can be helped accordingly. According to Bankrate, borrowers should also become literate when it comes to financial matters. It’s not up to a counselor alone to provide all of the knowledge you need.
Don’t Be Afraid to Check All Your Options
There are a variety of loan modifications available, such as government-backed and private lender modifications. It is not always a good idea to take the first offer simply because your payments have been lowered. There may be another loan modification that helps you out even more, so review all of your options instead of picking the first one presented to you. According to Home Ownership, one of the programs provided by the government is the Home Affordable Modification Plan, and this program can help you get a lower interest rate, longer loan term and possibly a principal reduction.
Be Certain You Can Make the Changes
There are different loan modifications available where you have lower payments, lower interest rates or even extended payback periods. However, be certain that these changes will work for you so that you don’t find yourself in dire straits later on. Some statistics show that those who have had loan modifications had higher delinquency rates later than those who didn’t.
Check the long-term plan to be sure it is a doable situation. For instance, if you have a lower interest rate that will increase after a year or two, make sure you can make those higher payments once the rate changes. Don’t simply look at the short-term solution without confirming you can handle any future changes that will effect your payment.
No matter what kind of loan modification you ultimately choose, try to be realistic in your expectations. Some people may think that a loan modification will change their entire financial status, and it won’t. However, a loan modification can help you make your payments on time and have more money left over each month after the mortgage is paid.
Before you get a modification, make sure you have an accurate budget drawn up and stick to it. By taking control of your finances now, you can make the modification work for you.