Top 5 Factors to Consider when Applying for the Home Affordable Modification Plan

‘Affordable homes’ was a common phrase used during the boom of the real estate industry. However, as a result of the financial crisis, mortgage payments have become a nightmare for most Americans. Check out the following information on a possible solution that you can go for if you are having problems paying off your home loan, or even forced to contemplate the prospect of foreclosure.

What HAMP Loans are All About

Economic stimulus, incentives for home loans, mortgage loan modification programs – these and more are the solutions that the federal government has come up with to somewhat ease the financial burden off homeowners. Since President Barack Obama was sworn in, one of the incentives initiated by the government is called the Home Affordable Modification Plan or HAMP.

Specifically, HAMP is part of President Obama’s initiative to make homes more affordable for the average American, and to prevent those facing foreclosures to save their homes. What HAMP does is allow homeowners with mortgage loans to qualify for a lower monthly payment through loan modification.

If qualified, you can lower your monthly payments to almost 31% of your pre-tax income. To make mortgage investors offer such a huge leeway for borrowers, the Obama administration offered incentives to them as well. If everything goes according to plan, HAMP is supposed to prevent four million homes from being foreclosed.

Factors to Consider when Taking Advantage of the Program

Now, what are the things that you need to keep in mind if you wish to take advantage of this mortgage loan modification program? Take a look at the following list:

1.    Determine if you qualify for HAMP.
To qualify for this home loan modification program, a few things will be tested. If HAMP is something that you wish to take advantage of, a Net Present Value Test will be performed. What this test does is simply compare the expected cash flow generated by the loan after it has been modified, against the expected income if the loan is not modified. If it is seen that it makes perfect financial sense to have the loan modified, the loan servicer will approve the loan.

2.    Remember that HAMP is all about payment reduction.
Keep in mind that since your primary residence is what is at stake here, the main goal of HAMP is to allow you to keep your home by reducing your monthly payments.

3.    Your debt-to-income ratio should be at least 31%.
There are programs guides implemented in HAMP which requires a loan service to reduce the payment from 31% to 38%.  Otherwise, the amortization will be extended up to 480 months.

4.    HAMP is not meant to help investors and speculators. 
For an individual to qualify for HAMP, the home should be his or her primary residence. Investors and speculators are not allowed to participate in the program.

5.    Take note that there is an income verification process and a trial period.
Just as it is with any other government incentive, the process of applying for HAMP is not without challenges. The income verification process is quite long, and there is a trial payment period. The goal of the latter is to train borrowers to make on-time payments – there is no grace period.

By knowing everything there is to know about HAMP, you can determine whether this is the financial break that you as a homeowner are looking for. You don’t want to give up too easily and have your home foreclosed without first doing something about it – so check if you qualify.

Article Tags: Home Affordable Modification, Affordable Modification Plan, Home Affordable, Affordable Modification, Modification Plan, Loan Modification

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