Question: What exactly is a loan modification? Is it a better choice for me than a short sale?
Answer: As the name implies, a loan modification or mortgage modification is an adjustment or alteration made to an existing mortgage loan. These adjustments to the terms of a mortgage, are intended to assist a homeowner who has gone delinquent on the mortgage, or one for whom mortgage difficulty appears unavoidable.
Among the most common modifications are adjustment to payment terms, adjustment to the interest rate or shifting of delinquent amounts to the back end of the loan for repayment later in the loan term.
Whether it is a better choice will depend upon each home owner’s particular circumstances and priorities. If your desire is to remain in the property and you feel that a slight adjustment in your terms would enable you to do so, perhaps a loan modification is your answer.
To further answer your loan modification questions, we turned to the government’s White House blog. Here is an overview of what we found there:
In order to slow the rising tide of home foreclosures and help people stay in their homes, the government instituted the Homeowner Affordability and Stability Plan encourages lenders who received bailout money to help homeowners stay in their homes by getting their monthly mortgage payments lowered through refinancing or loan modification.
Homeowners who are behind on their mortgage payments or who are struggling to keep current may qualify for a mortgage modification that reduces their monthly payment by reducing the interest rate and extending the term of the loan. Contact your mortgage servicer or mortgage lender. Many lenders will postpone foreclosure sales on home loans that could qualify for the modification.
To qualify, the house must be your primary residence, your mortgage payment must be greater than 31 percent of your monthly gross income and your loan mustn’t exceed current Fannie Mae and Freddie Mac loan limits, which vary by region and max out at nearly $729,750. Owners of two-, three- and four-unit properties are also eligible for modification as long as they live in one unit as a primary residence.
Many Georgia home owners may be facing hardships in this economy. If you have loan modification questions that are not yet answered here, just send us your questions, and our Best Atlanta Short Sales Team of Distressed Property Experts will find the answers for you.
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