Do it yourself loan modication to lower your interest rate and payments

Real Estate Agent with RE/MAX Shoreline New Hampshire & Maine

The new federal program to help homeowners stay in their homes by lowering their interest rate and payments by either modifying their existing loan or refinancing that loan is now open for business.

One of the best parts about this program is that there is no charge to homeowners. I know there are scam artists out there offering to 'help' you refinance or get a loan modification for a fee but there is no need to give them any of your money these programs are very simple.

Here's your first step. You need to visit and answer just a few short questions to determine if you're nominally qualified.

The first choice is a "Home Affordable Refinance" program which lets homeowners that are current on their mortgage payments but unable to refinance because their home's value has declined to less than their mortgage balance, refinance with a lower, more affordable mortgage.

You need to be able to answer "YES" to these four questions:

  1. Are you the owner of a one- to four-unit home?
  2. Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac? If you don’t know, click here.
  3. Are you current on your mortgage payments? “Current” means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months.
  4. Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

If you're eligible your next step is to gather some basic financial information. Here's a checklist of what you will need:

  • Information about your mortgage, such as your monthly mortgage statement and
  • Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources.
  • Your most recent income tax return.
  • Information about any second mortgage or home equity line of credit on the house.
  • Account balances and minimum monthly payments due on all of your credit cards.
  • Account balances and monthly payments on all your other debts such as student loans and car loans.

The information above is most easily compiled and readable in a personal financial statement; here's a sample form for you.

personal financial statement

After gathering this information you call your lender or loan servicer (where you make your payments) and talk with them about a "Home Affordable Refinance"

The second option for you is a "Home Affordable Modification". If you can no longer make your monthly mortgage payments you may qualify for this program to make your payments more affordable by modifying your mortgage to a lower interest rate and payment.

Here are the 5 questions you need to be able to answer "YES" to in order to see if you qualify:

  1. Is your home your primary residence?
  2. Is the amount you owe on your first mortgage equal to or less than $729,750?
  3. Are you having trouble paying your mortgage? For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?
  4. Did you get your current mortgage before January 1, 2009?
  5. Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) more than 31% of your current gross income?

After gathering this information and preparing a personal financial statement like the one above you also need to write a hardship letter detailing why you can't make your payments anymore, i.e. loss of job, laid off, illness etc.

And then, just like above contact your lender to talk about a loan modification to lower your payment and interest rate.

Many lender have made a committment to delay foreclosure proceedings to allow homeowners to see if they meet the minimum qualifying criteria.

I know of one person in my area that recently got a mortgage modification. Their interest rate was lowered to 2% for the next 5 years and then 4.75% FIXED rate for the remaining life of the mortgage.

If any Knoxville area homeowner are having trouble with either refinancing or applying for either of these programs I will be glad to help you get started; no cost and no obligation. email me of call 865-693-3232.



Posted by

Jim Lee , REALTOR®, Certified Residential Specialist (CRS)  RE/MAX Shoreline

100 Market St., Suite #200, , Portsmouth, NH 03801 Phone: (603) 431-1111 x3801

Visit New Hampshire Maine Real to search homes, get Seacoast area information, and find out how great living on the New Hampshire and southern Maine Seacoast really is.


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Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

Great info for consumers!  You put a lot of work into making this easy-to-follow guide, Jim.  I may have to follow your example and refer Crofton area buyers to these sites.  Thank you.

Apr 22, 2009 11:12 PM #1
Jim Lee
RE/MAX Shoreline - Portsmouth, NH
Portsmouth NH Realtor, Portsmouth, NH

Thanks Margaret. You're welcome to just reblog my post above and refer them to your blog.

Apr 23, 2009 12:00 AM #2
Michele Connors
The Overton Group, LLC Pitt & Carteret County - Greenville, NC
Your Eastern North Carolina Realtor

definitely worth a this is a good- should be localism feature!

It is easy to understand , descript of what is currently available.. good job

Apr 27, 2009 12:15 PM #3
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Jim Lee

Portsmouth NH Realtor, Portsmouth, NH
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