Streamlined Modifications: An Alternative to Bad Credit Home Loans
By Karen LawsonMortgage Credit Problems Columnist
What happens when your mortgage payments go up, or your income goes down? Mortgage payment adjustments, unemployment, illness, and excess debt can all lead to your inability to make monthly mortgage payments. What can you do if you've missed a few house payments, and want to avoid foreclosure? A new mortgage loan modification program may offer help.
Comparing Bad Credit Mortgage Loans and Mortgage Modification Options Missing your mortgage payments likely means that you've missed paying other bills, and have damaged your credit. The worse your credit is, the more expensive getting credit can be. Refinancing your current mortgage may be impossible, or if you can get a bad credit mortgage loan, it may carry high financing charges. If you want to keep your home, and have sufficient income to make payments, ask your lender about a loan modification. Here's how to get started:
Can Borrowers with Bad Credit Apply?
Borrowers who meet the following criteria are generally eligible for the streamlined modification program:
- Your mortgage is at high risk as determined by your mortgage lender
- You've missed three or more mortgage payments
- You occupy the home securing your mortgage
- You haven't filed bankruptcy
In order to determine your eligibility, your lender will require certain financial and personal information. Fully cooperating with your lender in providing requested information is in your best interest and can expedite approval and processing of your modification. Open and honest communication is important!
How Home Loan Modification Can Help
Mortgage loans modified under the streamlined modification program will be adjusted to provide monthly mortgage payments (including the amount of any homeowners association fees) to an amount of no more than 38 percent of your gross household income. Your mortgage lender can adjust your current mortgage terms by extending the life of your loan, reducing the interest rate, or deferring principle payments.
If standard modification procedures don't lower your payment enough to meet the required ratio of gross income to payment amount, lenders can make additional adjustments on a case-by-case basis. No matter how bad your situation may be, it is worthwhile to contact your lender and learn more about modification opportunities. Modifying your loan can help you save the high costs associated with bad credit mortgage loans while providing the opportunity to bring and keep your mortgage payments current.
Source:
james B. Lockhart, FHFA Director FHFA News Release Nov 11, 2008
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.
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