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How Do I Qualify for a Loan Modification in California?

How Do I Qualify for a Loan Modification in California?

A mortgage is a major long-term commitment, and along the way, your circumstances can change and make it more difficult for you to afford your loan payments. If you’re at risk of a default on your mortgage, you shouldn’t wait for it to happen. Instead, you can pursue a loan modification to make your life a little easier.

What Is a Loan Modification?

Put simply, a loan modification is a restructuring of your existing mortgage. Your loan’s term (repayment period), interest rate, other factors can all be taken into account and changed to help you better afford your mortgage. In some cases, a portion of your principal balance on the loan can even be forgiven.

If you’re wondering why your lender would even consider a loan modification, it’s because they often don’t want you to foreclose any more than you do. A foreclosure is expensive for your lender to pursue, after all. When a borrower like you needs help and a loan modification can avoid foreclosure, your lender may want to come to the negotiating table to discuss modifying the terms of your existing mortgage.

Loan Modification Eligibility Requirements

The purpose of a loan modification is to prevent an at-risk borrower from defaulting on their mortgage. This means that if you simply want to lower your monthly payments or change your interest rate (and you aren’t at risk of foreclosure), a loan modification isn’t the right tool for you – but refinancing might be.

That said, there are some eligibility requirements that must be met in order for a loan modification to work.

1. You Must Prove You Can Afford the New Payments

Generally speaking, you’ll propose a loan modification plan to your lender with evidence that proves you can meet the new monthly payment amount. Your plan should account for a monthly payment (that includes property taxes and insurance) of no more than 31% of your gross income.

You can arrive at this percentage by tweaking the terms, interest rate, and other provisions of your existing mortgage.

2. You Are Not Currently in Bankruptcy

Those seeking loan modifications generally shouldn’t be engaged in bankruptcy proceedings. Of course, you may be advised by your attorney to do otherwise.

3. Your Home Is Your Primary Residence

Loan modifications exist to help people keep their homes, not their rental properties or vacation homes. If you are at risk of foreclosure on real estate that isn’t your primary residence, a loan modification will not work for you.

Do You Need a Loan Modification Lawyer?

If you’re at risk of defaulting on your mortgage or are already involved in foreclosure, reach out to Nguyen Law Group today for assistance. Our attorney can help you devise a loan modification plan that makes sense for you. We can also represent your interests during negotiations with your lender.

For more information about our services, please contact us online.