Tips for Modifying Your Loan
Here are some general tips and advice for those who are considering or who have already started on the loan modification process:
- Take advantage of professional nonprofit help. A HUD approved housing counselor is a great place to start. Quality counseling can help you understand your situation, weigh all of your options, and prepare yourself to have the best change of approval for a loan modification.
- Gather your current loan information. Mortgage loans change hands often, and the company you originally borrowed from might not have anything to do with your loan currently. Gather your most up-to-date paperwork so you know exactly who owns your mortgage. Also be aware that sometimes a different company will service the loan on behalf of another company who owns the loan.
- Build a narrative. You will be asked to tell your “story” when applying for a loan modification. Have you suffered a hardship? Why? Put together a narrative that tells the story of your personal finances including how, when, and why they changed. Gather documents to back up this story, including tax returns, bank statements, mortgage statements, debt statements, medical bills (if your hardship was health-related), and other bills.
- Write a hardship letter. We covered this topic in more detail in our article, How to write a hardship letter to your lender.
- Communicate and be open. Don’t avoid contact from your lender; answer the phone, or any written communications you get. If you’re not sure how to respond, reach out to a HUD approved nonprofit housing counselor for advice. They’ll make sure you are well prepared for any contact you have with your lender, and that you talk to the right department.
- Document everything. Whenever you talk to your lender, make a note of whom you spoke to and what was discussed. Keep copies of every document you send and receive. This can help you bring your housing counselor up to speed, or help a lawyer defend you if it becomes necessary to go to court.
- Consider all of your options. A housing counselor can introduce you to multiple options, including modification, forbearance, a short sale, or some other option. Sometimes, your first choice won’t be a realistic option for you, but stay flexible and let a nonprofit HUD approved counselor come up with alternative options with you.
- Get educated. Read our Housing News to learn more about the state of the industry and the options available to you, like How to apply for a loan modification. Check out our “Preventing Foreclosure” Online Course and get the “Preserving Homeownership and Foreclosure Prevention” guide from credit.org’s Downloads page.
- Be prepared for anything. A lot of applications for loan modifications are denied. Understand that the odds may be against you. If you are turned down for a modification, take the opportunity to talk to a counselor and figure out what went wrong, and consider re-applying if your circumstances change.
The process of getting a loan modification is rarely easy; we urge anyone considering it to not go it alone. Let us offer you expert help and advice. Start here with our site and give us a call if you want to proceed to the next step.