What is a Mortgage Modification Loan?

A mortgage modification loan is exactly what it says it is--a modification of the specifications of a mortgage loan. It can be confusing, however, as there has been a great deal of information in the media about this program, with little specifics. It's geared towards homeowners who are in the unfortunate situation of being unable to meet the payments on their home loans, due to various circumstances such as job loss, etc.

The most confusing part of this program is the word "loan". The word "modification" is actually what the program is all about. It is intended to modify the terms and conditions of your current loan with the end result being a lower monthly payment that is affordable enough to allow you to stay in your home.

How do you get started? The first thing is to determine if you're eligible, because the rules are very specific. You'll be working with your current mortgage company and they will need all financial data you can provide in order to determine if you're eligible. The key items to gather are the date you took out the loan and how much is still owed on the principal. Additionally, you'll need the amount owed in interest, home owner's insurance and taxes. All these amounts are added up then compared to your monthly pre-tax income to determine the ratio of your mortgage debt to your earnings.

If your lender, using this information, determines that you are eligible, you'll be ready to start the official application for modifying your loan terms. You'll need to first obtain an application from your lender. Complete it carefully and completely. Make a copy for yourself and send in the original along with copies of documents which verify your financial status. This includes the above mortgage information but also items such as tax returns, verification of income and financial statements. Your lender will give you specifics on what's required.
Lastly, start on a letter of hardship. This is an important document so take your time and write it carefully. Give the specific details of how you got into the situation of being unable to afford your present loan. Explain an event which leads to your hardship such as loss of a job or excessive medical bills due to illness.

It may sound a bit overwhelming but if you take your time and carefully and systematically gather the information needed, you'll increase your chances of being accepted and speed the process along. Keep your eye on the end goal which is to stay in your home. A mortgage modification loan is intended for just this thing and is worth the effort.