5 Steps To A Loan Modification On Your Own

There are typically five steps you will have to go through during a loan modification. There are a lot of details involved and you will have to work hard. Follow each of these steps in order.

1. Explain your situation. This is typically done through what's called a hardship letter. Describe the situation that you have found yourself in and how you got there, but don't stop there. You need to show that you fully intend to stick with your payments and keep your home. A simple explanation of your hardship is not enough. Convince the bank that you want to do your part and make the mortgage payments, but simply can't at the present time unless the terms of your loan are adjusted. If the bank feels that your home is just going to end up in foreclosure anyway, they won't delay the inevitable by modifying your loan. Describe your hardship, but convince them that you are on your way up and out of it and that you need their help to take the final steps.

2. Find out what you can afford to pay. You need to have a monthly payment goal to shoot for during negotiations. It won't help you at all to get your loan modified but still be unable to make payments. Create a budget and determine what you will be able to pay each month. Aim to negotiate your loan down to that mark. If you skip this step, you'll be in the dark during negotiations and you'll run the risk of getting nowhere at all even if your lender agrees to modify your loan.

3. If the collections department at your lending bank has been trying to collect money from you, it may seem tempting to call them first and deliver your hardship letter to them in order to stop the calls. Don't do this. The collections department isn't involved in the loan modification process at all. Locate the loss mitigation department of your bank and speak to them. They will provide you with a loan modification application package, and they will tell you what other qualifications and requirements exist.

4. Your bank will require that you meet a given debt-to-income ratio. The loss mitigation department will inform you of what this ratio is. Gather any necessary financial statements that you'll need, and calculate this ratio as best you can. Hold onto those financial statements, too, because your bank will want to look them over as well. Be sure to include every form that the application calls for when you submit everything to your bank. There is high competition for loan modifications, and if your application is incomplete, you may simply be ignored. Check and double check that you have gathered all necessary financial documentation.

5. Professionalism is very important. If your application package is difficult to understand, sloppy, or incomplete, it will be rejected. You need to present yourself as someone who understand finances, who has his or her financial life in order but needs a little help through this difficult time. If you can pull that off, you'll stand a chance of having your loan modified.

Another alternative is to work with a professional loan modification company, where an agent will contact the bank for you, complete and review that application package with you, and help present your request in a professional manner. If this sounds like an attractive alternative, do some research and find a local company today.