One of the leading factors used in applying for a loan modification is a change in your financial situation that makes paying your current mortgage a hardship. The financial statement you provide to your lender during a loan mod request is the single most important document to prove your case. This is the “make or break” document that for the most part is one of the main documents that the lender bases their decision on.
There are many documents that you will have to fill out to your lender when you receive your loan workout package. One of the most important will be the financial statement. Often times the lender includes a simple one page financial form in your loan mod paperwork. Pay special attention to this document and complete it with great care because more often than not this will be the first document the lender will review when they are attempting to consider your worthiness for a loan modification!
What is the financial statement?
The financial statement is a complete breakdown of all of your expenses[spin]. All household income, meaning everyone living in the house including renters and those not on title or on the current mortgage are considered in calculating income. Yes, that is true, everyone in the household that has income is considered.
Getting approved for a [spin]loan modification is NOT like getting approved for a normal home loan. When you applied for your current loan your lender looked at your last two years income history. They compared this against only the minimum payments for any debt reporting on your credit report to determine if you could afford the mortgage payment. With a loan modification it is quite different. They are going to look at all sources of your household income.For self employed borrowers, completed tax returns and last 6-12 months of business and personal bank statements to consider additional deposits as income versus just what was claimed on your tax return.
One major difference in how a lender evaluates a loan modification versus the original loan is how expenses are treated. The lender will request a complete picture of your monthly expenses. In the original loan the lender evaluated your minimum payments for accounts reporting on your credit report. With a loan workout, all household expenses are evaluated, such as homeowners insurance.
The list of your expenses is quite detailed. There are no exact guidelines that the lenders have written in qualifying expense ratios. That is why it is important to find a company that has experience in dealing with your particular lender. However, if expenses are too high and can not warrant the homeowner’s ability to pay the mortgage payment, then the loan modification would be denied.
The lender is not about to tell you how to complete this section and help the homeowner adjust this section to help qualify for a loan modification. It many cases, the homeowner may need to cut expenses or figure out ways to increase income. The best way to get help in this section is through a loan workout company that is experienced with each lender, and can show a track record of working with that lender. Remember, the lender does not have any written guidelines for this section and thus puts you as the homeowner in a disadvantage with the lender.
Contracting the services of a qualified attorney backed loan workout company can help you ensure that you have properly filled out your financial statement so that you have the maximum chance of receiving a loan modification. You can apply for a free loan modification consultation now and we will be happy to review your financial situation with you in detail.
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