How do you know if you qualify for a loan modification

March 20, 2009 at 10:26 am Leave a comment

How do you know if you qualify for a loan modification? One of the key things that your lender will be looking for is your debt-to-income (DTI) ratio. Normally, they would look for a range between 30 to 40 percent DTI. So, if your are making $6,000 a month in gross income, you should be looking at paying no more than 40 percent of your income towards house payments, which amounts to $2,400.

A DTI ratio below the minimum of 30 percent means you make enough money to afford to make your mortgage payments and a review of your expenses may be necessary. If your DTI is higher than 40 percent, that means you don’t earn enough money to sustain the life of the loan and you will be a risky borrower for the bank. Above the 40 percent DTI, you may not qualify for a loan modification.

The lender will also want to know specifics about your claimed hardship. Whether it is relocation, loss of job, reduction in pay, illness, an interest rate reset on another loan, etc., be ready to offer details.

You may directly negotiate a loan modification with your lender. In some cases, you may hire a professional lawyer or mortgage broker to negotiate on your behalf. Most of these professional services charge an up-front fee comparable to your month’s mortgage, around $1,000 to $2,000. There are legitimate loan modification outfits and there are those that are loan mod scammers. To find out about legitimate and recommended loan modification companies, visit the HUD counseling agency at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webListAction=search&searchstate=AZ

If you are denied a loan modification by your lender, a short sale of your home is the next-best thing to do. You need to contact a Realtor to help you in this process. I am experienced in short sales with average 74- to 90-day closing time and no up-front fees. It is best to begin a short sale process once you are just about to miss your first payment.

To get more information about the federal guidelines set by the Obama administration on loan modifications, go to http://www.financialstability.com. And for any questions you have about the local real estate market and what kinds of solutions you might be able to take advantage of, feel free to contact me anytime.

Entry filed under: Arizona Real Estate, Chandler Real Estate, Foreclosures & Short Sales, Phoenix Real Estate, Real Estate Deals.

A Positive Turn in The Arizona Real Estate Market Should I Modify My Loan or Short Sale My Home?

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