If you’re thinking about applying for a loan modification, without professional help, you should answer the following questions first:
1. Are your financial troubles temporary or permanent?
If you answer “temporary”, as almost everyone believes or wants to believe their financial problems are, you may have just lost your Making Home Affordable loan modification.
If you answer “permanent”, you may have just lost any other type of loan modification for which you would otherwise have qualified.
The correct answer is anybody’s guess, but your “guess” may well disqualify you, as it did for one poor guy appearing on the 10 O’clock news a week or so ago. He said “temporary” , and months later he got a rejection letter from his bank. The reason given for the loan modification rejection? ‘Your financial problems are only temporary.’ Permanent or temporary, his problems were sufficient for him to lose his home to foreclosure.
2. Do you receive any child support or alimony/maintenance?
Answering yes to this question can qualify you or disqualify you for a loan modification. Only the review of your financial situation can determine how best to answer this question. Note that you have the option of providing this information for consideration, or not providing it.
3. If you have others living in your home, are you receiving income from them, or are they helping with household expenses?
Again, your financial situation will dictate how best to answer these questions. We never advocate lying or misleading a lender. However, there is some information which you must disclose, and some information which need not be disclosed. There are also different options on how to include this information. You can report reduced household expenses based on the contribution of your boarder toward those expenses, or you can prepare a formal lease even if the boarder is a relative like your son, or you can sometimes include your boarder’s gross monthly income. Only a financial analysis will disclose how best to report or present this information to your lender. The way you present this information to the bank, even though the net financial result to you for having a boarder is the same, could easily determine whether you get your loan modification.
Conclusion: If you don’t know who really owns your loan, if you’re not adept at the necessary financial analysis for a loan modification, if you don’t know the difference between net and gross income, or if you don’t know whether one or the other needs to be higher or lower to qualify for a loan modification, then you shouldn’t be playing this game. It would be a bit like playing poker when you don’t know if a flush beats a straight. Yes, you might get lucky, but there’s a lot at stake in this game.
If you don’t know the answers to the above questions, please make sure and learn them before you call your bank for a loan modification. Also, fair warning… these are not the only tricky questions your banker may ask.
