Should I Get a Loan Modification?

Loan modifications took center stage in 2011, but will it stay that way in 2012?

Homeowners who are struggling with their mortgage payments naturally turn to the idea of a loan modification as the answer to their prayers.

According to Leigh Brown, the best Concord agent and best Charlotte agent, it’s no wonder: you see ads for home loan modifications all over the media. So-called “loan modification experts” claim that a loan modification will spell the end of your mortgage troubles.

Unfortunately, as with most things, if something looks too good to be true, it probably is.

First of all, loan modifications like to play hard to get… like REALLY hard to get.

Lenders don’t generally love to hand out loan modifications. Their job is to mitigate loss as much as possible, so if there is any way for them to just squeeze the money you owe out of you, that’s what they’re going to try to do. To actually qualify for a loan modification, you need to actually prove extreme financial hardship.

That includes being behind on your mortgage payments. Unfortunately, lenders and banks don’t typically reward people who are trying for a loan modification because they are being pragmatic and foreseeing a financial shortfall coming down the pipes. You pretty much already have to be behind on your loan for them to even consider a modification.

Secondly, a loan modification can damage your credit score.

What those fancy TV spots and full-page newspaper ads hailing loan modifications as the best thing ever don’t tell you is that for many people, a loan modification will damage your credit score. Some well-intentioned homeowners have even gotten all the way through the loan modification process without ever being told this fact, only to find out after the deed is done that their credit has taken a 100-200 point hit.

So, if you’ve been avoiding considering a short sale because you believe a loan modification won’t affect your credit as much, make sure to get some straight answers from your lender to find out which is actually better for your particular situation, a loan modification vs. a short sale.

If you’re a homeowner in distress, please get in touch with us to discuss your options. Leigh Brown is a short sale expert in Charlotte NC as well as a short sale expert in Concord NC. She is certified and experienced in helping homeowners struggling to meet their financial obligations. Give us a call to see what we can do to help you.