Mortgage Modification

It is very stressful when you own your own home and are having financial difficulties. If those difficulties are making it impossible to pay your mortgage you are not alone, you may find yourself facing foreclosure. Although it is difficult to associate foreclosures with good news, there is some. In most states, regardless of where you are with the foreclosure proceedings, there is always a way to stop a foreclosure.

When it comes to stopping a foreclosure, there are many ways of doing this, and the best chances are in the pre-foreclosure stages. This is before the courts have approved the proceeding and ruled in favor of the mortgage lender. Until this point in time, you are still the resident and owner of the home in question. If you do not feel that you can come into money, either by getting a second job or a loan from those that you know, now is the time to try for a mortgage modification.

First let's look at the advantages of a mortgage modification. If you are behind on your mortgage and it does not matter if you are 6 months, 1 year or longer, you could be eligible for a mortgage modification. When you receive a mortgage modification your bank will modify your mortgage and note with new terms. These new terms could be an interest rate as low as 2%, reduced principal, a 40 year mortgage and the best part is you will be caught up and starting fresh with monthly payments cut almost in half. A mortgage modification does not cost anything and they do not look at your credit.

A mortgage modification is the best option for saving your home. You can get a modification through the Home Affordable Mortgage Program (HAMP) or if you do not qualify for HAMP you can get what's called an inhouse modification (which is through your own bank). With a modification they will bring your mortgage current with a new lower interest rate, as low as 2%. Now pay attention, I'm going to give you an idea of what the banks are looking for to get you approved for a modification. This could be a little complicated. Let's say you owe $200,000 on your mortgage and you're behind $50,000 in arrears for a total of $250,000 (this number represents what you owe the bank today, including late payments, in other words if you sold the house this is what you have to pay the bank). Take the amount you owe and figure what your qualifying payment will be by amortizing it over 30 years by using today's mortgage interest rate and add your escrows (monthly property taxes and insurance) to the amount. THIS IS NOT YOUR NEW PAYMENT, it's your qualifying payment (to see if you qualify for a modification). Banks are only allowing 31% of your income to go towards the mortgage, so what you must do is take your qualifying payment and divide that by.31. This number will represent how much money you should be making each month to qualify for a modification. Hopefully you are making that much money every month. Your new payment will be lower than your qualifying payment, you could get as low as a 2% interest rate. There is much more you need to know to get a successful modification, there are many more tips and secrets you would need to know, but this will get you started. You can stop a foreclosure with a modification up to 7 days before the auction date. They will only stop it if they believe you qualify for a modification.

As a last resort, you may want to schedule an appointment with an attorney that specializes in foreclosures and real estate. Many will suggest filing for bankruptcy. Some states offer protection to homeowners. This protection may exclude their home as an asset or at least temporarily stops the foreclose proceedings.