Loan Modification - How To Know If You're Getting A Good Deal

Maybe you've just completed a mortgage modification, or you're in the market for one and you want to learn all you can.  Either way, you're likely wondering how to tell whether a home loan modification deal is good or bad.  Regardless of what stage of the process you're in, you'll want to be sure that what you're getting will actually help you when all is said and done.  How can you determine this?  There are two primary methods, and these are outlined below.

Be aware, however, that because loan modification is a fairly recent development in the financial industry, few standardized comparisons have emerged.  There is no specific table you can look at to see what the proper interest rate should be, or anything like that.  Loan originators are not under any obligation to provide loan modifications at all.  In some situations, the fact that you were able to get any kind of deal may be good enough.  In other situations, you may be digging yourself into a deeper hole.

The closest thing to a standardized evaluation approach is the "31 percent test," which comes from studies performed by the FDIC which have shown that a healthy monthly housing payment is one that is less than 31 percent of your total monthly household income. You really shouldn't be paying more than 31 percent of your money into your home.  This is the closest thing to a guideline that exists in this industry.  If your monthly household income is $4500, you shouldn't be paying more than $1395 in housing expenses.  If after your loan modification your payment is higher, you may have cause to question whether you got a good deal.  But this is just a general principle.

The best way to determine whether you're getting a good deal is to perform what some call the "real life test," which basically asks the question, "Did it work?"  Did your loan modification save your house from foreclosure and get you back on your feet financially?  If so, then your mortgage restructure was successful!  If you're able to keep your house rather than see it lost to creditors, then you know you've gotten at least a "good enough" deal on your loan modification.

But to find the best deal, contact a trustworthy professional in the field.  There's no better way to navigate the complex, unstructured waters of mortgage modification than to work with someone who knows the industry.