If you get to a point where you are experiencing a permanent or temporary financial hardship and feel you may miss a mortgage payment, it is good to know there are options. Whether you have a conventional, FHA or VA loan, your mortgage loan servicer has options to help you through those tough times.

It’s important to communicate with your mortgage servicer the minute you think you are going to be late. While often times they cannot do anything for you until you have missed at least 1 payment, being proactive will get you a step ahead of what to expect when the time comes to look into a loan modification.

Each servicer will handle the modification process a little differently and has a packet with instructions and forms that need to be completed in order to be considered for a loan modification. In general, they are going to want you to provide a letter explaining what led up to the late mortgage payments. Was it a reduction in income, was it health related, did a primary borrower obligated on the loan pass away? Whatever the reason, you must have sufficient documentation to support your explanation.

Your servicer will also want to see a budget outlining your monthly expenses and monthly income. This is important because in order to receive a modification, you must illustrate that you are capable of making a mortgage payment. Having a big negative number at the end of the month is not going to help you get a modification. Most modification programs offer a payment as much as 20% less than your scheduled payment so if you show you are only able to pay half of what you are used to paying; there is a slim chance you will be approved for a modification.

There are a few ways servicers modify the loan to establish a lower payment and which method they use will depend on whether your financial situation is permanent or temporary and how much reduction is needed. They may add all late payments to your loan balance and then extend the term of the loan to as much as 40 years. They might forbear a portion of the balance to a later date at 0% interest and then have you pay on the remaining balance at a reduced interest rate. In some cases if the problem was temporary, they may divide up your late payments over a period of time and add them to your regular house payment.

Regardless of what type of modification you are offered, there will be a trial period to make sure you can afford the new payment. This can be anywhere from 3 to 6 months. Should you get through that period without missing a payment, then the modification will become permanent.

To learn more about loan modifications based on the type of loan you have, here are those agency websites to refer to:
Fannie Mae
Freddie Mac
VA
FHA

If you have more questions, please call me anytime.
traci@ffaz.us
Direct: 928-202-4270
Cell/Text: 916-813-4213