Loan Modification: How Long Do You Have?

If you are struggling to pay your mortgage, you have probably been paying attention to the reports about Obama’s Loan Modification Program. If you qualify, you could finally have found the solution you have been searching for to help you keep your home. One thing you may have been wondering is how long you have to apply for assistance.

If you are just beginning to realize that you are over your head in your mortgage, you may not yet be in default. If that is the case, you may have a little time. The deadline, of course, is December 31, 2012, but one unexpected event could propel you quickly into default and, ultimately, foreclosure. So, do you really have that long?

If you are already behind on your mortgage, then no one has to tell you that unless you act, foreclosure is imminent. You may not realize that you can still get a loan modification if your payments are already in default. You just need to act immediately to see if you qualify to begin the application process.

Before you call your lender, you should find out everything you can about the program’s application guidelines. Then, you want to prepare your application according to those guidelines, carefully checking all details. You need to document every fact and figure in your application package with the appropriate paperwork and receipts.

After you have done your homework, then you should contact your lender. Reworking a mortgage through this government program involves working with the lender or bank that issued the original mortgage. They are just changing it to achieve a lower monthly mortgage payment for you so that you will be able to afford it. This is done through various adjustments that they can make: lowering interest rates, lengthening your loan, and even reducing the principal of the loan itself.

They will want you to write a letter describing how you got to the point where you could no longer afford your house payment. Were you the victim of a questionable banking practice? Did your plant close, and you have been forced to accept lower-paying employment? What about illness and medical bills? Maybe you have become the sole person responsible for the house payment through the death of a spouse or divorce. These are reasons that could be considered financial hardship.

So, if you can qualify for a loan modification, you should get the whole thing started as soon as possible. You don’t really know how much time you have, but there is a lot at stake.