Debunking 4 Myths of Home Loan Modifications

A lot of homeowners are in need of a home loan modification, but most of these folks are wondering where to turn for service or feel they do not meet the qualifications.  Myths abound about almost every type of financial help, but with the existing troubled economy, folks need to know the truth about modifying their home loan.

MYTH: A mortgage modification is just a refinance.

A modification of your loan is a totally different transaction from a refinance.  A refinance restarts your loan under new terms, while a loan modification makes changes to your existing mortgage for a lessor rate and lower payment.  A refinance can be a benefit to those that have experienced a decrease in their home value and wish to have their mortgage reflect that different value, whereas the modified mortgage works off the original value of your home.  To be able to refinance requires a good credit rating.  Modifying a mortgage only demands decent credit and the qualifications are based on common statistics from the majority of homeowners.

MYTH:  Bad credit automatically disqualifies you from a mortgage modification.

As previously mentioned, loan modifications are designed more for homeowners with less than perfect credit.  There are lenders that can be flexible in their mortgage modifications with homeowners suffering from lower credit scores, but a lot of lenders do not negotiate with those who have allowed their credit to drop too far.  Look for agencies that provide a free consult about mortgage modifications and determine if your credit will qualify.  An attorney can also be a great resource in helping you get approved for the modification.

MYTH: Only people with late mortgage payments get approved.

Although it is not unheard of for lenders to approve a home modification for borrowers that have not missed a mortgage payment, it is not common.   Lenders are not happy about helping borrowers that are currently paying on time.  If you have not missed a mortgage payment and your lender refuses your modification request, provide them with your financial documents.  If that does not work, seek the help of an attorney.  If you can prove your financial distress you are entitled to receive assistance.

MYTH: If hiring an attorney is not within your budget, you will not be able to get the lender to approve your loan modification.

This is not entirely true.  While an attorney could definitely make the process more likely to succeed, there are cases where an attorney is not necessary.  Certain situations are perfect for loan modifications.  Seek out a free consultation from a loan modification agency and determine how your circumstances match up to the requirements.