What Is A Loan Modification
What Is A Loan Modification?
Homeowners who are facing a tough financial situation and want to modify their mortgage loans will be able to take advantage of the federal government’s Home Affordable Refinance Program (HARP).
The HARP program was established in 2009 and it is administered by the U.S. Department of the Treasury. This program is designed to help homeowners to refinance their home mortgages to lower their interest rates and save up to 30% of the current loan amount.
What Is A Mortgage Modification?
A mortgage modification is the process of reducing the mortgage payments by lowering the principal and interest rate on the mortgage. This could help the homeowner save money over the course of the loan’s life. If a homeowner refinances their mortgage under the HARP program, they can also receive help with reducing their property taxes and insurance premiums as well.
What Are The Requirements To Modify Your Home Mortgage?
The borrower must qualify to receive a modified loan in order to participate in the program. Borrowers who are underwater or have negative equity in their homes can still benefit from the loan modifications.
The borrower is eligible if he/she:
• Has had a residential mortgage for at least five years
• Has a home worth less than the original value of the home, plus the existing mortgage
• Has had a payment of less than 31% of his/her gross monthly income
• Has had no late or missed payments for more than 90 days in the last 12 months
• Does not have a default on his/her loan
• Has a job that earns a salary of at least 80% of the area median income (AMI) in the state where the borrower resides
• Owns the home as a primary residence
• Lacks another mortgage on the home
• Does not owe back taxes to the government on the home
• Does not owe back taxes on the property
• Has not received a foreclosure notice
• Does not have any bankruptcy proceedings or legal actions against the home or the lender
Who Can Get A Mortgage Modification?
If you qualify for a modification, you will be able to reduce the principal on your existing mortgage balance and get a new lower interest rate. You can also get reduced monthly mortgage payments, and the loan balance may be eliminated.
Your new interest rate will be based on the lower rate the mortgage market is offering. The interest rate for your loan can be as low as 3.625%.
However, the federal government will pay part of the closing costs for the borrower.
Benefits Of Getting A Loan Modification
There are numerous benefits of getting a loan modification. One of the main reasons why you should try to qualify for a modification is to lower your monthly housing payments. As a homeowner, you will be able to save up to $4,000 per year. You can also save up to $30,000 on the mortgage interest and principal over the life of your loan.
Additionally, the borrower can eliminate the debt of the property and avoid the tax consequences. If you are in default, your credit
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