How to Apply for a Loan Modification

People call our housing counselors every day with questions about saving their homes.  Whether you’re eligible for a loan modification is a top concern for people who are unfamiliar with the process.

Every situation is unique, and participation by lenders is voluntary, but the government is offering incentives for them to participate. No two mortgage modifications are the same. That’s why one-on-one counseling is so essential; it takes into account the borrower’s unique situation so the counselor can help craft the best plan for them.

Still, there are general principals and tips we can offer to help anyone who is considering a loan modification.

How to apply for a loan modification

  1. Documentation. Applicants will have to gather a number of documents to help convince the lender they will be a good candidate for a modification:
    1. Hardship letter
    2. Pay stubs
    3. Written budget
    4. Tax returns
    5. Specific documents as requested

Lenders receive a flood of documents every day from thousands of borrowers, so help them by being extremely organized. A HUD-approved housing counselor can help you prepare your package and ensure every page is labeled properly.

  1. Be accessible. Keeping the lines of communication open with your lender is essential to getting a modification. Be available to your lender if they have any questions. Don’t ignore the phone when it rings or the mail when it comes. Respond to any written communications right away.
  2. Reach out. Keeping communication going is a two-way street. If you’re waiting for a reply from your lender, call them each week to check on the progress of your application and ask if anything else is needed from you. If your circumstances change in any way, reach out quickly to amend your application—lenders who are evaluating a loan mod application will be reassured when they hear from you throughout the process.
  3. Be ready to adapt. Your first loan modification attempt might not work out. You might not qualify for the program you want. That’s okay; there may be other programs available for which you do qualify. A counselor can help you evaluate all of your options and tailor your application to the best choice for you.
  4. Don’t give up. Remember you are one of many people queued up at the lender’s door. Stick with the process. You might have to sign more forms, re-sign forms you’ve already signed, and produce extra documents throughout the process. This is normal, and the more responsive you are, the better your chances of success.
  5. Be honest.  If you did something to place your finances at risk – possibly a substance abuse or gambling addiction, be honest and explain.

If you have any questions about how to apply for a loan modification, or want to explore a particular loan mod option, call us today for a free session. HUD approved housing counseling can help you get the best mortgage relief option for your unique situation and a counselor can help you with every step of the process.