Loan modifications have always been a possible solution for financial problems, but they have become more popular recently due to the passage of President Obama’s Making Home Affordable Act. Along with this Act, the process has be simplified and it has become easier to be approved. It is worth the time taken the time to investigate this plan.
If you cannot pay your monthly mortgage payments or you are finding it very difficult, don’t assume this is how it has to be. Don’t wait until you are in desperate circumstances and facing foreclosure before you do something. Make an appointment with a financial adviser to discuss your situation while you still have options. Sometimes you can visit a free adviser or you can hire someone. HUD-approved charity groups will offer free financial counseling, but since there is so much demand for this right now, many groups have been formed.
It is your decision to pay or not pay. Both have pros and cons. Some companies have lawyers who work with them, some don’t. If you can find a company that offers legal consultation, choose it so you have the option of having a lawyer help you get your loan modified. Use extreme caution when you are employing a company to help you. Again, since there is such a demand for this service today, many companies have been formed who offer financial solutions. Not all these companies are legitimate and some are simply frauds out to take advantage of desperate people. Use a company that has a good reputation and a solid history. Check with the Better Business Bureau to find out their rating.
The obvious question is, “what is the interest rate on this new loan, or what’s in it for them?” The interest rates will surprise you considering the risk. Typically interest rates range between 2.5% to 8.25%. The date(s) the loan(s) were taken out, and when the loans were consolidated primarily dictate the interest rate. The ICR is NOT based on credit, so not to worry if your credit is bad. Once the rate is locked it is locked forever. Currently all loans that are variable that were taken out between 7/98-6/06 the interest rate lock is 3.75%. If before 7/98 = 4.5%, and if after 6/2006 the interest rates are from 6-6.8%. All “Parent Plus” and “Grad Loans” are 8.25% regardless of other factors.
Some convincing reasons are a layoff, a natural disaster, death, divorce or illness. Write concisely. Your counselor will help you compose this important document and submit it to your lender with all necessary financial documents. It is very important that whatever company you are working with advocate for you during this confusing and trying process.
Learn more about Obama Mortgage Relief Plan Qualifications.