Common Misconceptions About Loan Modification

You must be late on a payment to apply and/or qualify for a loan modification

FALSE – Although a loan servicer may tell a homeowner they must be late, this is not necessarily the case. Often times the loan servicer will try to dissuade homeowners from applying for a modification in order to filter out those who in fact can afford to continue to make their payments. A homeowner does not need to be late on payments to qualify or apply for a loan modification. If you are facing financial hardship and are barely able to afford your payment(s) each month, now is the time to consider a loan modification in an effort to avoid foreclosure.

Because you are unemployed, you have a better chance of qualifying for a loan modification

FALSE – To qualify for a loan modification, the homeowner must have a source of income that proves to the lender that, even though there is difficulty in making the current mortgage payments, there is the ability to make payments moving forward if the monthly amount is reduced.

If you lack equity in your property and are unable to make your mortgage payments, you should walk away from your home and relinquish the property by mailing your keys to the original mortgage lender.

FALSE – Sending 'jingle mail' can negatively impact your credit history for ten years and will prevent you from securing a new home loan for at least three years. A lender may consider a short sale offer if they believe it will be less costly to them than completing a foreclosure. A short sale may still adversely affect your credit history, but not nearly as much as a foreclosure or deed-in-lieu. There is also a shorter wait period for securing a new home loan (within two years) following a short sale.