Loan Modifications for the Unemployed

Declining home values are not the only problems that have been created by the current recession. More and more businesses are closing their doors and trimming the fat by laying off employees by the dozens, and sometimes, by the hundreds. With such high unemployment rates plaguing the nation, many unemployed homeowners are looking for ways to delay and prevent foreclosure while preventing their loans from falling into default. For homeowners facing financial uncertainty while employed, home loan modifications seem like the obvious option for keeping their homes away from foreclosure by lowering their monthly payments. With lenders learning to take fewer risks, modifying the loan of an unemployed person can be difficult for many lenders to swallow, but not entirely impossible. On the bright side, government programs are helping lenders be more flexible with unemployed individuals seeking home loan modifications.

When lenders decide which requests to approve for modification, they review the debt to income ratio of the applicant. Individuals receiving unemployment benefits will have more luck being approved for a loan because the lenders prefer to see any income instead of none. This is not to say, however, that those not receiving unemployment benefits are completely out of hope.

Many experts recommend waiting to request a loan modification until employment can be secured, or at least until an offer of employment has been made, or at the very least, until an interview is scheduled. Lenders will appreciate the borrower’s determination to find employment and will view conditional offers of employment in a better light than no offers at all. In most cases, a person can apply for a loan modification up to 30 days from their assigned date of foreclosure, so the person ambitiously pursuing employment may benefit from delaying the process for a few weeks.

While rare, it is not entirely impossible for unemployed individuals with no unemployment income and having little to no luck in finding offers of employment to be approved for home loan modifications assuming very specific criteria are met. The criteria for home loan modifications for the unemployed will differ from lender to lender, but as a general rule, those will strong work histories will have better luck than those without. A strong work history shows strong potential for future employment, and therefore, future income, while a weak employment history only increases the amount of risk the lender will have to take.

Remember, getting a lender to modify a loan is difficult enough. Unemployment is one more wrench thrown into the problem that can increase difficulty. An attorney can direct many borrowers considering a loan modification in the right direction, but even these can be costly. Attorneys who have experience in real estate and finance law are well adept at handling clients with financial troubles, and many will provide financing assistance of their own to allow clients to pay back attorney fees and expenses over time. Investing in an attorney may seem like an expensive option now, but considering how much more successful attorneys can be when negotiating with lenders, the cost of an attorney should be considered a minor investment on the path to financial stability and debt elimination.