| When you apply for a loan workout with your lender | | | | then the bank may consider forgiving or deferring |
| you will be asked to complete a loan modification form | | | | some of the loan balance. Homeowners can use a |
| called a financial statement or budget. This is a detailed | | | | simple software program that mimics this process so |
| accounting of your monthly income and expenses. | | | | that the new terms will be immediately displayed-and |
| Your bank looks at this to determine if you will qualify | | | | borrowers will be able to see if any adjustments need |
| for help. How you prepare this form will be a big factor | | | | to be made to their financial statement in order to |
| in whether you get approved or not-make sure you | | | | qualify. This is an important tool to use so that the |
| know a few tips that could help you qualify. | | | | lender is supplied with an accurate and acceptable |
| A loan modification financial statement needs to prove | | | | financial statement the first time. |
| to your lender in black and white that you cannot | | | | After the new target payment, your budget should |
| afford the current loan payment because you have | | | | balance-meaning that you can afford to meet your |
| more money going out than you have coming in. But it | | | | monthly obligations. This is the goal of your loan |
| must also demonstrate the ability to afford the new | | | | modification forms. You may have to adjust your |
| modified mortgage payment. How can you do that | | | | budget to make it balance, eliminating some expenses, |
| clearly? | | | | or trimming others so that you can make the house |
| First, you must be able to determine your target | | | | payments and the rest of your fixed expenses. This |
| payment-this is the new loan payment that you will ask | | | | will demonstrate to your bank that you are not a risk |
| for. This is the goal-a new lower payment that you | | | | of default in the future. |
| can afford and fits into the lenders guidelines. You then | | | | A telephone interview with your bank where all of this |
| use this target payment as the centerpiece of your | | | | information is verified is a big part of the approval |
| new budget-showing the bank that after you pay all of | | | | process. You should have your budget all figured out |
| your bills, including the new lower target payment, you | | | | and in front of you before you call your lender. You do |
| have a little bit of disposable income left over for | | | | not want to be stumbling about and make a mistake |
| expenses. The federal plan calls for a target payment | | | | that could throw you out of the approval guidelines. |
| that equals 31% of the household gross income. So, | | | | When you work on your financial statement, and fine |
| take the total gross income and multiply it times | | | | tune your budget beforehand, you will be prepared to |
| 31%-that equals the new modified payment. | | | | speak with your lender. Make any adjustments that |
| Remember, this includes monthly property taxes, | | | | the software program indicates to pass the triggers |
| homeowners insurance and any homeowner dues. | | | | for approval, then submit your accurate and |
| This new target payment must be able to be achieved | | | | acceptable application-avoid costly mistakes. You |
| using the federal guidelines of modification-first reduce | | | | should have all of your information right in front of you |
| your interest rate to as low as 2%, if the payment | | | | on your loan modification forms so you don't make a |
| cannot be reached then extend the term to 40 years. | | | | costly mistake. Loss mitigators say this is the biggest |
| If the target payment is still not able to be reached, | | | | reason for denial-homeowners who are not prepared! |