Although many people are familiar with foreclosure as a consequence of not being able to meet mortgage payments, loan modifications are not as well known. For some, loan modifications may allow you to keep your home and reduce your monthly payment to get out of a difficult financial situation. However, there are several factors you should consider before applying for a loan modification program.
1. Understand that applying for a loan modification program doesn’t halt the foreclosure process. Even if you have good intentions of fixing a bad financial situation and you are diligently completing every step of the loan modification application, your lender can continue the foreclosure process. As a result, it can be a risky endeavor where you spend the little income you have as well as invest valuable time only to lose your house to foreclosure in the end.
2. Watch for balloon clauses and extremely long terms. If you are fortunate enough to get a loan modification approved, be sure to read the fine print. In some cases, the initial terms of a new loan sound appealing with lower payments or interest rates. However, they may have a balloon payment due shortly after, forcing you to pay thousands of dollars all at once. In some cases, lenders extend the mortgage contract to 50 or 60 years, making it nearly impossible to pay off the entire loan.
3. Know that the loan modification application can be extremely long and cumbersome. The process of applying for a loan modification can require mounds of paperwork and documentation. In addition, the process can take a long time to complete. The reality is that if you can’t afford to make mortgage payments, a loan modification program will probably not help in the long-term. It may only delay a foreclosure and take away what little income you have in the meantime.
4. Pursue a loan modification only if your income situation has changed for the better. The bottom line is that a loan modification may be the right solution if you’ve had a temporary loss of income and that you’re on the road to financial recovery. In this case, a loan modification may provide the time required to get back on your feet without losing your home. Be sure you understand that the payments will return soon enough and that you will need to have the income to support it in the long run.
Before you begin pursuing a loan modification application, you may want to consult with bankruptcy lawyers Las Vegas to see if it would be a reasonable solution for you. Reputable bankruptcy lawyers Las Vegas can help you think through your options and come up with a long-term plan to help you get back on the road to financial stability.