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Qualifying for Loan Modification


A loan modification lowers monthly payments by creating an affordable payment plan with your lender, letting you catch up and move forward while remaining in your home. This article is intended as general information and does not constitute legal advice.


Although each situation is unique, the following criteria usually indicates a good candidate for loan modification:

  • You have received a Notice of Default or Notice of Mortgage Sale
  • You are one or more months behind on your payments because of an acceptable hardship
  • You have a Debt-to-Income ratio of less than 50:50
  • You have enough steady income to keep up with reduced payments
  • You have been offered a rate freeze without requesting it
  • You own a second non-rental property
  • You anticipate a drastic change in your financial circumstances in the near future


The following indicate an even better candidate:

  • You have a delinquent loan (except previously modified within the past year)
  • You have an ARM which will be adjusted within six months
  • You have a fixed high-interest loan with a sub-prime lender
  • You have demonstrated a well-documented hardship
  • You have a steady income and minimal additional debt beyond your mortgage payment


A not-so-great candidate for modification would include the following:

  • You have a Debt-to-Income ratio of greater than 50:50
  • You have already filed for bankruptcy
  • You are consistently late on mortgage payments
  • You have owned your home for a year or less
  • You have purchased a home outside of your means
  • You have refinanced to purchase additional items (such as a car)


Modifications that will not work include:

  • A rate freeze or previous modification within the past year
  • Low fixed rate with no hardship, and payments are on time
  • Lost property value
  • ARMs that will not adjust within the next six months
  • Option ARMs that are not late or have not adjusted
  • Loans with private hard-money lender with equity in property
  • Claimed hardships with insufficient evidence and high assets
  • High property equity
  • Insufficient income
  • Excessive unsecured debt
  • Unfiled taxes


Because of the nature and extensive guidelines involved with loan modification, please contact Spillane Law Offices for a free consultation if you have questions about your eligibility.



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