5 surefire techniques to get your lender to approve your Loan Modification
After several years of modifying loans for our clients and for ourselves we have sure learned a lot. Although there are no guarantees that your lender will approve your loan modification application, we have figured out some methods that do work consistently no matter what lender you are working with.
- The Hardship Letter: Your bank must see clearly you are having a hardship. Provide them with a 1 page explanation of your hardship and why it would help if your payment and/mortgage balance was lowered. A hardship should be a situation that is temporary such as a loss of a job, one time expense, or an interest rate increase.
To download 7 sample hardship letters go to: Hardship Letter sample - Debt to Income Ratio: Show your lender that a new lower payment on your mortgage would result in a 31% or less of your gross income. If your income is $5,000 a month, then the new mortgage payment you would request is $1,550 ($5,000 x 31%). Next, calculate how much 90% of your gross income is ($4,500 in the above example) and subtract the amount you came up with for the 31%. In the above example this would result in $2,950. This is how much you have left to pay for other monthly expenses, which leaves you with 10% left over. The 31% is your mortgage debt to income ratio and the 90% is your total debt to income ratio. Although this is not the hard and fast rule for all banks, most use something very similar, so you must ask them so you can make sure you fit into those requirements.
If you want a simple fill-in-the-blanks worksheet that will calculate all this for you click here to buy our step by step loan modification ebook.
- Value vs. Mortgage: You want to show your lender that they should give you a loan modification instead of foreclosing on your house. By showing them that the value is less or equal to your existing mortgage with them it gives them an incentive to modify your loan. Using an online service like Zillow you can pull up comparable homes in your neighborhood to verify the value of your own home. Print these comparables as backup and send them in with your initial loan modification package. The bank will get their own appraisal but you should have a clear understanding of your true value, especially when trying to negotiate a principal reduction.
- Persistence and Followup: Making weekly phone calls and repeating yourself should become part of your schedule when trying to get a loan modification. It is not unordinary to provide the same information to different people at the same bank several times before they receive it. This is why it is critical to not only be persistent but organized. When you're in the process of modifying your loan it will change hands several times at the bank and each department may request new information. Provide that information in a timely manner and track every phone call, fax, and communication you have with the bank. You will need this should the bank not receive something you have sent or excuse you of not providing what they requested and declining your application.
Most importantly do not give up and understand what they want!
We have developed an easy to follow, step by step guide that walks you through exactly what you need to do to get a loan modification. The book provides worksheets that calculate all the numbers for you and provide you with printable forms you can use to submit directly to your lender. You also get hardship letter samples and how detailed instructions on how to write your hardship letter.