The average homeowner stuck in a bad loan and struggling to make their mortgage payments does not understand the loan modification process and how the Obama federal program could help them. That's too bad-because $75 billion dollars has been set aside to help those homeowners. Here is some information that outlines what is involved in applying and qualifying for a loan modification.
The loan modification process is basically a 5 step procedure that a borrower must navigate successfully to get their mortgage modified to a lower terms.
Contact your lender and tell them you are having trouble making your payment and are facing a financial hardship situation. They will either refer you to their website for the application forms or mail them to you. CAUTION: do NOT give them any of your financial information on this first call-you need to have time to learn and prepare before you disclose your income and debts. Now that you have the forms (you can also use generic loan modification forms available in a kit), you can begin gathering all of the required documents and start working on your budget and proposal. You need to understand a bit about what the approval guidelines are so that as you prepare your budget, you will be able to make the necessary adjustments and prove to the bank that you meet their criteria for approval. This step is critical to success-if you just blindly give your bank your information you risk being turned down because you did not know you needed to make some minor adjustments. Fax and mail in your complete loan modification package to your lender. Keep copies of the entire package for your records. Don't leave anything out or your answer will be delayed. Follow up in 5 days to make sure it was received and has been logged into their system. Then you will be given a short telephone interview during which your information will be verified and the lender will ask you a few questions. Make sure you have all of your paperwork in front of you and ready for you to refer to. If you have already figured out what your target payment is and know that your debt ratio is in line-because you worked on your budget beforehand-you will have a good chance of approval. The bank will send you the loan workout proposal and you must sign this with a notary present. Make sure you review the agreement carefully and verify that it is what you agreed to.The loan modification process using Obama's federal plan has standard approval guidelines and standard terms. If you can prove you meet those approval guidelines, you could have your interest rate reduced to as low as 2% for 40 years. It is worth your time and effort to learn and prepare before starting your application process with the bank. Just a little bit of your preparation could make the difference between approval and denial.
The federal program, called HAMP, has been streamlined for 2010 and it is now possible to get your loan modification in just 30 days from the time you submit your application. The way to get this quick response is to send in your accurate and complete modification application the first time, and be certain that your financial statement proves in black and white that you fit into the standard approval formula. This means that your debt ratio and income and expenses meet the guidelines. If you are not sure how to figure this out, then you may want to use a software program designed to help homeowners complete their application correctly.
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