Loan Modification Guidelines: How to Get Approved For a Modification

Do you understand what it takes to qualify for you to receive a lower monthly mortgage payment? Are you aware of the criteria needed for being approved for loan modification? If you have been wondering if you qualify for President Obama’s Federal plan, make sure you are aware of what the bank’s guidelines are in order to be approved, before you apply. According to the plan, $75 billion has been set aside to assist eligible homeowners. Unfortunately, not everyone will qualify.

The aim of this program is to modify the loan agreement so that the borrower pays no more than 31% of his monthly income on his mortgage. When negotiating with a borrower who is in danger of falling behind on his payments or who is facing the foreclosure of his home, lenders now have an understandable, uniform set of guidelines to follow. These instructions are known as the Standard Waterfall. Following the Standard Waterfall, here are the steps the lender will take:

It is crucial that your financial statement presented to your bank reflects your ability to afford the reduced mortgage payments. Alter your budget ahead of time, cutting any unnecessary expenses. The bank will want to see that you are making an effort to improve your situation the best you can, with the funds needed available to maintain your payments. Under the Federal plan, your payment will be no between 31-38% of your gross monthly income, factoring in your property taxes, homeowner’s insurance, and HOA dues. Whatever that figure is, set your expenses and adjust your budget around it.

Your home must be your primary residence, with your original loan date prior to January 1, 2009. Your conforming loan limit is $625,500 (previously $729,750 in 2008). You must also be in a hardship situation for your finances, medical or credit debt, job loss, or adjustable interest rate increases.

One of the common technique by which this can be done is by revising the interest rate of your loan. You can shift from variable interest rate structure to flat fixed interest rate structure in order to reap benefits low rate of interest. This is a tried and tested technique that helps in ensuring that your house is saved and debt is paid for

Learn more about Obama Mortgage Relief Plan Qualifications.