In the absence of mortgage refinancing, your options for securing a lower interest on your home loan are limited. If you are fighting to make your mortgage repayment, however, you might be eligible for a loan modification, which adjustments the terms of your present mortgage rather than bringing you into a brand new one. If you are delinquent in your payments and facing foreclosure, you likely won’t get approved for a refinance anyhow.
Consult your lender. You are able to come across the lender’s contact information on your own monthly mortgage statement. While some lenders offer their own in-house modification applications, most will likely see whether you are eligible for the government-sponsored Home Affordable Modification Program. Treasury Department data shows that the nation’s major mortgage bankers have processed a majority of HAMP activity.
Prove financial hardship. To be eligible for a loan modification, you have to demonstrate that you cannot manage your existing mortgage payment. Your present outlay must exceed 31 percent of your gross yearly income. In addition, you need to convince the lender, with verifiable data, that you will be able to afford the modified mortgage payment.
Show written confirmation of your income and expenses to acquire approval for a HAMP trial modification. Since the Treasury Department reports, lenders can’t accept verbal confirmation of your circumstance. Applicants need to provide employment, income, cost and debt confirmation to underwriters. This includes contact information to your employer and banks as well as tax returns, paycheck stubs and credit card statements.
Make three consecutive on-time payments if the lending company approves you for a trial modification through HAMP. Your monthly payment will not exceed 31 percent of your yearly income. To get there, the lending company will initially reduce the loan’s interest rate to as much as 2 percent. If this doesn’t bring your payment to the 31 percent threshold, the lender has the option of also expanding the loan duration and depositing or forbearing some of your mortgage debt.
Continue making your mortgage payment if approved for a permanent HAMP adjustment. The Creating Home Affordable website explains the reduced interest rate stays in effect for five decades. After that, the speed increases gradually until it hits the market rate from the day your loan modification was initially approved. The rate will then stay fixed for the life span of your loan.