Like the porridge that was “just right,” loan modifications are a solution for a narrow spectrum of homeowners who have fallen behind in their mortgage payments. Essentially, those who can qualify for these loans are borrowers who have experienced a reduction in salary but continue to receive a steady, reliable income.
Distressed homeowners who’ve lost their jobs or fallen on extremely hard financial hard times and, on the other hand, homeowners earning high salaries usually don’t qualify for this option either. If your current income is too low – or too high – you could be left out in the cold.
What is a Loan Modification?
First, what is a loan modification? Basically, it allows a borrower to make lower monthly mortgage payments by agreeing to a modification of his/her original loan terms.
The idea behind this concept, logically, is to give homeowners struggling to make their payments every month an opportunity to catch up on their loan and recover from their hardship.
However, to qualify, you must show some earning capacity. Borrowers who don’t make enough will get turned down for loan modification because it’s not in a responsible lender’s best interest to extend credit to them. Why? Because the lender is focused like a laser on his or her bottom line and only modifies homeowner loans when they think they can still make a profit.
So, if the borrower doesn’t make enough money to cover his/her monthly payments at the lowest amount the lender will offer, then the borrower will be turned down. This aspect of loan modification follows a certain ruthless logic. The reason some higher-earning homeowners get turned down is a little harder to understand.
On the higher end of the earning spectrum, mortgage lenders often deny loan modifications homeowners who make “too much money,” reasoning that they should have no trouble making payments.
Navigating this loan modifications swamp can be especially perilous for borrowers because lenders don’t release a scale or grid that explains the amount a borrower must make in relation to the amount of their monthly payments in order to be approved for loan modifications.
Before You Get Turned Down
So before you get turned down for loan modification, consider speaking with an experienced foreclosure attorney. With their skilled guidance, you can get a better understanding of whether you’re likely to be approved for a loan modification and why you do or don’t meet the lender’s criteria.
You’re probably confused and put off by the prospects of loan modification before broaching the subject with your lender. Don’t be. Call McFarlin LLP today before you get turned down for loan modification. You’ll have the opportunity speak with an experienced California loan modification specialist.
Contact McFarlin LLP Today
Call us today to set up a time to talk at (888) 728-0044 to learn more about the ins-and-outs of home loan modification and whether you’re likely to qualify for a new loan in your current financial situation.