Loan Modification
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Loan Modification Kit
How to do a loan modification

The government revealed the Making Home Affordable Program in February of 2009 to help homeowners who were in jeopardy of missing mortgage payments or behind on their payments. The program is made up of two main areas: Loan modifications and loan refinancing. The loan modification portion of the Making Home Affordable Program is called the Home Affordable Modification program (HAMP) and is tool to help decrease mortgage payments for struggling homeowners. The refinance plan is known as the Home Affordable Refinance Program (HARP).

A loan modification has been known to help homeowners jump back on their feet after a temporary fall due to some kind of financial hardship. The way these homeowners were able to receive their loan modification is because they showed their lender that they were in need of help in order to maintain their home. When a homeowner goes to their lender about a short sale, the lender will typically ask for a cluster of documents validating your yearn for a loan modification as well as your ability to be able to afford a lower monthly mortgage payment that may be due from the loan modification.

The following list is a generalization of typical documents that most lenders will require the homeowner to submit in order to approve a loan modification:

Hardship letter- This letter will be written by the homeowner and will state the reasoning for the inability to be able to make mortgage payments.

Homeowners financial worksheet- This will give the lender an idea of your income and assets, and is similar to the Uniform Residential Loan Application that was completed when applying for the primary loan.

W-2 - Two years

Bank Statements- The lender will want this because they will want to know if there is a pile of money sitting in your bank; if so, chances of an approval is doubtful.

Pay Stubs- Two months

Mortgage Statement- Copy of the most recent one.

Current Financial Statement- This will give detail to your monthly income and also your expenses and will show how much of a loss you are taking each month with the mortgage payment.

Cover letter- This will explain why you are making your submission of all the above documents. Its important to make sure the cover letter has your name and loan number on it.

Before making your submission to the lender, be sure all papers have been signed and the loan number is included on all documents within the package to insure they are not misplaced. Homeowners should realize that they may only have one shot at getting their loan modification application approved, so it is highly advisable to follow all instructions given by the lender in a timely fashion. The quicker the documents can be submitted, the quicker a potential approval can be determined.

One of the greatest benefits of a loan modification is that lenders will typically agree to one in order to avoid a foreclosure. In a foreclosure they will lose money by potential vandalism or repairs that occurred due to a vacant home and banks are in the loaning business, not housing repair business. Most lenders would rather give a homeowner the chance to re-establish themselves rather than deal with the foreclosure process and the amount of work and time it could take to get the house sold again. However, should the loan modification deal be broken, the lender will take further action. It is important for any homeowner to know that they do have options in order to avoid a foreclosure and it is always best to try and research those options as quickly as possible.