The first step in determining if a home loan modification is right for you is to look at the big financial picture not just the home loan issues.
At a minimum, the following information should be compiled and analyzed;
1. Household Income: This includes income from all sources, employment, business, social security, unemployment, child support, etc.
2. Household Living Expenses: Most people do not budget for all the necessities and then fall into the trap of resorting to credit cards to pay for “unexpected” expenses. A complete household budget should include not just the regular monthly expenses, such as food, utilities, mortgage payments, car payments, etc but also the occasional expenses that may not occur on a regular basis but are necessary such as insurance premiums, car maintenance and repair, out of pocket medical/dental expenses, educational expenses, etc.
3. Outstanding Debt Repayment: This includes credit card payments, student loan payments, etc.
4. Hardship: What is the financial hardship? Loss of income, increased expenses? Being upside on the house value does not constitute a hardship for purposes of a loan modification.
If after calculating the household income and deducting the necessary household expenses and debt repayment, there is no disposable income or are in the red, then a “modification” of some kind needs to take place. However, the home loan modification alone may not help.
Take a look at the other debt you are repaying. How much is that per month? If it is a significant amount then even with a lower home loan payment you might not be able to make ends meet. This is important to evaluate because a home loan lender may deny a loan modification if the homeowner has a substantial amount of other outstanding debt. The reason for this is that a home loan modification would not help to keep the owner financial viable and in the home when the monthly expenses exceed the income.
How much should you pay for a loan modification request? NOTHING! You can do it yourself but you have to be able to prepare an application that would give you the best chance to get a loan modification offer from the lender.
For a free initial consultation regarding these and other related issues, please contact attorney and financial counselor Susana B. Tolchard at 661-287-9986.