Frequently Asked Questions
Do I qualify for a short sale?
The qualifications for a short sale include one or all of the following:
- Financial Hardship – there is a situation that is causing you to have trouble affording your mortgage. Common hardships include loss of job, reduction of income/hours worked, or medical bills
- Monthly Income Shortfall – You have more bills than income. A lender will want to see that you cannot afford or soon will not be able to afford your mortgage.
- Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
- Relocation for Job – if you relocated for a job and your job location is far enough away that commuting to your home is not feasible, you need to sell your house and your house is worth less than what you owe – you may be eligible for a short sale.
What is a mortgage Modification?
.A loan modification can allow borrowers to stay in their property when they can no longer afford their current mortgage payments by reducing their monthly payments. A mortgage modification is a process through which your mortgage lender changes any or all of the following to help reduce the monthly payment:
- Interest Rate on Loan
- Reduction of your principal balance
- Changes your loan terms (from an adjustable interest to a fixed interest rate or from an interest only loan to an amortizing loan)
Why would a lender modify my mortgage?
Lenders realize that when possible – it is better to work with current borrowers to lower their payments by improving their terms to help keep homeowners in their properties. The average foreclosure costs can cost a lender from 35 to 50% of the value of the property which results in a greater loss for the lender than lowering the interest rate or changing the loan terms for the current borrower.
What do I need to qualify for a mortgage modification?
Based on the Making Home Affordable Web site – www.MakingHomeAffordable.gov – you will need the following information for your lender to consider a modification:
- Information about your first mortgage, such as a monthly statement
- Information about your second mortgage or home equity line of credit on the house, such as a monthly statement
- Information on all credit cards – account balances & minimum monthly payments
- Information on all other debt such as student loans, car loans, etc – account balances & minimum monthly payments
- Your most recent federal income tax return
- Account balance(s) on all saving accounts, checking accounts and any other assets
- Documentation of your gross monthly income of your household, including recent pay stubs or documentation of any income you receive from other sources
- May also be helpful to have a short one page letter describing any circumstances that have caused your income to reduce or expenses to increase (illness, divorce, job loss, etc)
How do I qualify for a mortgage modification?
Prior to contacting your mortgage lender(s) you can quickly complete an eligibility test at www.MakingHomeAffordable.gov. This test will let you know if you are eligible for a modification through the government-sponsored Home Affordability & Stability Program (HASP). You can find a list of mortgage lenders & services by visiting www.HopeNow.com.
Even if you do not find lender(s) or think you meet the requirements of a mortgage modification – call your lender. Many lenders now have in house programs to help modify or refinance your home if you have been current on your payments. It is worth the call.
Call your lender(s) and ask the customer service line what options they have available for mortgage modifications. Many lender(s) now have the information on their web sites as well. In the event you reach a customer service person who doesn’t understand what you are asking for you can ask to be transferred to the loss mitigation department, the short sale department, the mortgage modification department or the HAMP department. Different lenders have different names for the departments so be patient and keep asking!
What if I don’t qualify for a mortgage modification?
If you do not qualify for a mortgage modification and you cannot afford your home – you can still sell your home – even if your home is worth less than what you owe. First of all – it is important that you know that you are not alone and that foreclosure is not your only option.
If your lender(s) or servicer will not work with you on a loan modification, you may want to consider a short sale. As a Certified Distressed Property Expert® – we have undergone extensive training on the short sale process. A short sale allows you to sell your home for less than you owe. Let’s talk and see if this is an option for you.
What is a Home Affordable Refinance?
If Fannie Mae or Freddie Mac owns your mortgage, you may be eligible for a Home Affordable Refinance. This will allow you to refinance your home and often will lower your payments.
What are the qualifications for a Home Affordable Refinance?
Based on the resources released by the government, the following are a list of qualifications:
- You are the owner & occupant of a 1 to 4 unit home
- The loan on your property is owned or securitized by Fannie Mae or Freddie Mac
- At the time of your application, you are current on your mortgage payments and haven’t been more than 30 days late on your mortgage payment in the past 12 months. If you have had the loan for less than 12 months, you have never missed a payment.
- You believe the amount you owe on your first mortgage is about the same or slightly less than the current value of your house.
- You have income sufficient to support the new mortgage payments and the refinance improves the long term affordability and/or stability of your loan.
Again – even if you do not fall into the requirements of the government programs – many lenders are now refinancing existing borrowers with loans in good standing. It is worth calling your lender.
How does a Second Mortgage or Home Equity Line of Credit fit into a Loan Modification or Refinancing?
If you have a second mortgage or a home equity line of credit, be sure to ask your first mortgage lender/servicer how this will fit into the scope of your modification/refinancing. It may not impact your loan modification but if you are refinancing your first mortgage you may need to have the second loan subrogated to the first mortgage. Once you have talked to your second mortgage, call your second mortgage and find out from them if they would be willing to subrogate to a refinance of your first mortgage. There may be a change from the first or the second mortgage on the subrogation.