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Many homeowners are struggling to pay their monthly mortgage payments each month, and many of them do not qualify for traditional mortgage refinancing. This is a catch-twenty-two among homeowners because many of these mortgages that are failing were written as subprime mortgages in the first place, and now that the mortgage interest rate has adjusted to its inflatable high, the payments are more than some hardworking families can afford.
You can, however, modify the terms of your mortgage in what is known as mortgage loan modification in order to lower the rates that you are paying in terms of interest, and in turn, lower your monthly payment so that it is more affordable. There are government incentives for lenders who work with you to keep you out of foreclosure, and most lenders are willing to participate in order to stop a home from being foreclosed in a bad housing market.
How Can I Qualify?
The government mortgage modification is simple to qualify for. You must live in the home that the mortgage is written for, and you must be either behind on your payments or anticipate that you will be falling behind because of a financial hardship. You must be able to prove a financial hardship and submit an affidavit of hardship to the lender. You must also be paying 31% or more of your gross monthly income from all sources toward your mortgage payment. This is determined by figuring your debt to income ratio. Your lender has the specific forms that are required to be filled out to apply for mortgage modification.
How Will Mortgage Modification Help?
When you modify your mortgage, your lender will modify the terms of your existing mortgage to a more affordable rate, which can be as low as 2%. For those homeowners who are paying significantly more than 2%, this modification can help them reduce the amount of money that it costs to finance their mortgage, and this will in turn reduce the amount of money that they pay each month on the mortgage loan.
Modification can also extend the number of years that you are paying for your mortgage, up to forty years, which can also help to lower the monthly payment that will keep you in your home. Additionally, your mortgage can be modified from a variable rate mortgage to a fixed rate, which means that the rate of interest that you will be paying on your mortgage will not vary based on financial indexes, but will remain steady for the entire repayment period.
Are Mortgage Modification And Mortgage Refinancing The Same?
Mortgage modification and mortgage refinancing work in much the same way, but they are different. In mortgage modification, you are modifying the terms of the mortgage, not taking out another loan. Mortgage modification is perfect for those homeowners who are on the brink of losing their home, and applying is easier and less costly than mortgage refinancing.
How Do I Apply?
To apply for mortgage modification, you will need to visit or call your existing lender. The lender will have all of the paperwork that you need to get started with your mortgage loan modification, and will be able to answer additional questions that you might have.
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