How to Modify Your Home Loan: It's Not That Difficult

Millions of homeowners across the country are wondering how to modify a loan. To most homeowners it seems like one big mystery, but in reality it's quite the opposite. Modifying your loan isn't easy, but lenders and banks aren't accepting and denying applications based on some secret formula: They are looking at how big of a risk you are.

It's true that lenders are picky about who they give loan modifications to, but if you were in the same position you would be the same way. Your lender needs some sort of evidence that continuing to finance your home is in their best interest. A lender may be lending you money, but they are still a business.

The first step on how to modify a loan is this: Find out what your lender's requirements for modification are. You may be tempted to jump right in, but having a general idea as to whether you'll be approved initially or not beforehand can save you a headache. Next, if you're not confident, try to make an appointment with a representative under the Home Affordable Modification Program. These consultations are free and these representatives can even help you negotiate modification terms with your lender.

Approach your lender with any documentation you can gather on your income: pay stubs and bank statements are both great (if not required) proof of your income. You will need to provide expense documents as well, such as any bills. Also show your lender your income tax documentation for the previous year. Any proof of your past, current, and possible future financial status is going to help you plead your case of financial hardship.

Besides the actual documents your lender is going to want to see, you are going to have to write a hardship letter to send in along with your application. The hardship letter is not only a place for you to explain why you're in the situation in now, but you can also state what your plans are to get out of it. The lender looks for proof of your intent in your hardship letter, so it is a huge crucial point in your negotiations. Your hardship letter needs to be formal and to the point. Don't hop around what has happened or what you want. Lenders don't have all day to read a whole length of a letter or a sad story. They want the facts and only the facts.

It's no big mystery how lenders work and how to modify a loan. Get all of the documents listed above and present them to your lender. If they do not initially approve your loan modification application, ask why. If it seems like you should be qualified, the reason is probably something you can work out.