How Loan Modification is Helpful to Avoid Foreclosure?

Before the foreclosure hits you, you must be aware of the different ways you can go for avoiding it. An action taken earlier before you are late with your loan repayment would be better than acting later and the loan modification is the first option you can go for to keep the foreclosure at bay. In this write-up, we are going to tell you that what is loan modification and how it can help to avoid foreclosure in Houston.

So, What is Loan Modification?

Loan Modification is an agreement between the lender and the homeowner in which the terms of the loan are modified to lower the monthly loan payment and make it affordable for the borrower. The mortgage can be modified by extending the loan term or by lowering the interest rate. And in the case, the homeowner is already in default, the overdue mortgage payments would be added to the principal. Depending on the terms of the loan modification, the overdue payments can be paid over the entire loan term or in a single payment at the end of the loan term.  

Options with the Loan Modification

The main aim of the loan modification is reducing the monthly payment amount and it can be done in some different ways. Here are the available options.  

• Extending the loan term: In this, the loan term is extended so that the homeowners can get more time to pay the loan and as a result of this expansion, the monthly payment amount is reduced. However, the extended period should not be more than the original loan term.

• Reducing the interest rate: The interest rate is reduced for the remaining loan period and this also reduces the monthly payment amount. By making those payments, the homeowners can easily avoid foreclosure in Houston.

• Reducing the principal: In this, the principal of the loan is reduced and it is mainly done for the houses which are depreciated that makes the homeowners owe more than the home's market's value.

• Step rate: In this option, the step rate is reduced temporarily and then is brought back to the original rate gradually. This allows the homeowners get back on their feet and resume payments.

How does it Help?

All the above-mentioned options explain that how each of them makes the loan's monthly payment affordable for the homeowners. They can talk to their lender, explain them their situation, show the proof of monthly income to make sure that the hard time has been over. And then, they can make their lender to qualify them for loan modification according to one of the four options that will be suitable for both the parties. In the case, you are not aware of the loan modification procedure, you can seek the help from an experienced foreclosure agent in Houston.  

" However, don't wait until you default on your mortgage payment; it would be better to apply for the loan modification process earlier. As long as you are able to prove that you may be behind on your payments, your lender would consider you for the loan modification.  "