Among some of the most important steps to avoid financial distress for a home owner, one is applying for a loan modification, which modifies your mortgage payments, making it easier to pay and ensuring foreclosure is avoided. Regrettably, though, it is very detailed and even minor mistakes can delay or destroy your loan modification application; thus, preventing common mistakes. Here are the five top mistakes to avoid when applying for a loan modification:
1. Incomplete or Inaccurate Documentation
The most common mistake that you will make in an application to the loan modification is submitting paperwork that is incomplete or contains inaccuracies. Lenders will call for the inclusion of information about financial statements, such as income statements and tax returns, bank statements, and a hardship letter. All of these documents can prove the missing components or slightly incorrect information contained in your application, thus possibly leading to delays or even denial. Make sure that you check everything you submit to ensure that all the lender asks you to provide is present and all figures are consistent and accurate.
2. Failure to Communicate with Your Lender
After having submitted your application, it would be important to communicate clearly with your lender on the matters of clarity, consistency, and frequency. After all, most homeowners do think that after submitting an application they have done their job. Not so; lenders often request additional information or clarification. If responses to these requests go unopened or are delayed, the whole process can be seriously derailed. Check in regularly with plenty of follow-up questions and concern to ensure your application is moving along as expected.
3. Waiting too long to apply
In other instances, homeowners delay too long before asking to have the terms modified, hoping that their economic situation is going to improve. Unfortunately, procrastination will likely injure your chance. If you experienced several late payments, you are further away from the date of foreclosure, and your lender might not consider approving a modification of your loan. In this case, the earlier you realize that you cannot pay the monthly payments, the sooner you should apply to have your loan modified. Pro-activity will also enlarge your spectrum of choices and give you more opportunities to work on a solution with your lender.
4. Failure to Precisely Establish Hardship Financially
The lender only provides loan modification with clear evidence of serious financial disturbance like loss of job, cost of medical treatment, or other extreme obstacles. This is one of the offenses where there is no interesting case, showing why one needs this modification. Your hardship letter should detail the hardships you are undergoing and the effect they have had with regard to not being able to pay. There will be a possibility of disapproval if one presents an unappealing case.
5. Lack of Financial Counselling
Most home owners underestimate how much help financial counseling would add to the modification process. Like modification is something they would do all by themselves, without any expert’s guidance. But involving a HUD-approved housing counselor will make a world of difference. A counselor can help you understand your options and prepare all the necessary paperwork, and communicate the best with your lender. They also lead you on the path of protection from scams targeting homeowners in the need of modifying their homes.
Conclusion
A loan modification applies like any other loan or line of credit. But careful attention to detail is crucial, and communication must be clear and proactive. There are five common pitfalls that can lead to the submission of incomplete documents, delay in the application, failure to demonstrate hardship, and careless submission past the deadline. Avoiding these pitfalls increases your chances of receiving a successful modification. The more prepared and organized you are, the better things will go. Stay in touch with your lender, seek the help when needed, and work to extend the term of your mortgage.