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Taking a Closer Look at Loan Modifications
by jimolen bush
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If you are like one of the millions of Americans who is struggling to keep up with your mortgage payments, you may be wondering what kinds of options are available to you. After all, foreclosure should be looked at as a last result, as not only will foreclosure cause you to lose the equity you have built with your home, but it will also have a very negative impact on your credit rating.
Considering a Loan Modification
Depending upon your current financial situation, getting a loan modification may be a good route for you to take. In most cases, you won't be able to qualify for a loan modification unless you have already started to miss payments or you are making payments that are 30 days or more behind.
When you make a loan modification, you get the lender to agree to change the terms of your previous agreement. Depending upon the lender, this may or may not be reported to the credit bureaus. If it is, it will likely result in a drop in your credit score. While this is unpleasant, it generally impacts your credit less severely than it would be if you continue to make late payments over an extended period of time. In addition, it is far better than foreclosure. Furthermore, if your lender doesn't report the loan modification, you might actually see an improvement in your credit score because you will be able to keep up with your payments and because your monthly payments will be shown as less than they previously were.
Negotiating the Best Deal
Even if you are struggling to make your mortgage loan payments, it is no reason for you to rush into a deal without thinking it through thoroughly. If you have been a good customer, your lender may be more willing to report your loan modification in favorable terms. Therefore, discuss this option with your lender beforehand and see if you can get the company to agree to more favorable terms. Remember, the lender doesn't want to see you default on your loan, either. Not only does this result in more paperwork and expense for the lender, but the current economic conditions mean that your lender is unlikely to recoup the full cost of your loan if it is foreclosed upon.
Using the Law to Your Favor
When exploring your options, it is also important to learn more about the government's Making Homes Affordable Program. Through this program, you can obtain a reduced payment schedule from your lender and, if you maintain your payments for three months, the reduced payment amount may be made permanent. Unfortunately, some lenders are reporting this "trial" period as if homeowners are failing to stay current on their payments.
If you find this to be the case with your lender, be sure to point out that the government guidelines stipulate that these trial modifications are to be listed as current, but with a modified schedule, on the credit report. Although this still may have a negative impact on your credit rating, it won't be as bad as if your payments are being reported as late.
Jim Olenbush is a Realtor working in the Texas real estate industry, and he owns Cantera Real Estate. He recently added a new Austin Mortgage department to his real estate brokerage.
Article Source: www.homehighlight.org
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