Here are some questions that you need to ask yourself when you want to see if a home loan modification is right for you.
Was there a time when you were unable to make a mortgage payment?
Have you missed more than two payments on your mortgage?
If you answered yes to these two, then you do need a home loan modification in order to save you home from a possible foreclosure. It is much simpler and less expensive that refinancing. A mortgage modification would not have a negative effect on your credit rating.
If you have answered yes to these two questions it is nearly impossible to refinance because your credit rating will be decimated.
In essence, if you ask for a home modification at your bank or through the government home loan bailout program, you are letting them know that you are no longer able to meet your monthly payments and you need urgent help.
Payment reductions.
You should work with your lender to figure out which option would be best for you. You can either
a) Cut your interest rate or
b) ask for an increase in the length of the loan.
Either of these two options can help in reducing the required monthly payments. These options are available with the lenders who are part of the federal bailout program and will make your payments affordable.
Notice of default.
If you have been served with a notice of default already, you should think about getting the mortgage modification right away. You can start the home loan modification by either:
a) Approaching the bank or lender yourself and making the arrangement with them; or
b) Have your lawyer negotiate the new terms on your behalf, but this will cost you and you can do it yourself.
You will need to convince the bank or lender that you can meet the monthly payments under the new term when the mortgage modification is granted so it is best to negotiate a realistic and affordable amount.
If you chose a lender who is part of the government loan bailout program they have an obligation to do this as part of their being in the program and you do not need to do this.
You should also understand that the foreclosure proceedings on your home do not automatically reverse once you are granted a home loan modification. The lending institution who is handling the foreclosure needs to be contacted as well and usually the company who is doing the modification will do this for you.
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