Financial Stability Tips to Help with Tough Circumstances

Are you having a bad month financially or might you be experiencing the best financial times in your life, remember that it is sensible to attempt mortgage modifications and refinances when things are going well. Check into the subsequent loan tips to get a gage on how things are going for you fiscally and whether or not it might be a decent time to look into some new mortgage products and save a little hard-earned money.

  • Have you filed for bankruptcy in the past? If you filed Chapter 13, you may need approval from your trustee to enter into a mortgage. If you filed Chapter 7, your debts need to have been discharged for at least 2 years and be able to show that you have reestablished your finances with the capability to repay a home loan.
  • If you did not make a down payment of 20% or more on your home, you are most likely required to pay private mortgage insurance (PMI). A few years down the road, you may be able to cancel this insurance. This may occur if you have paid down your principal balance to a specified amount below the appraised value. Of course, the requirements vary, so be sure to ask your lender what need to happen in order for you to stop paying PMI each month.
  • Errors and inaccuracies on your credit report may prevent you from approval for a mortgage. Be sure to check your report at least 6 months before applying for a mortgage in order to have enough time to pay off debts and fix any errors. Look for things such as accounts with companies, which have gone out of business, credit accounts you no longer have, and even wrong addresses where you previously lived. Be sure to dispute these errors immediately with the reporting agency, and find out what needs done to fix them or have them removed from your report.
  • Do you receive regular bonuses, or has your pay increased at your job over the years? Stating this information on your loan application proves job stability and helps to establish creditworthiness with the lender. Hopping from job to job will likely result in a rejection rather than an approval.
  • Are you interested in modifying your mortgage? While you might have heard that your mortgage needs to be in default before a modification consideration, you should continue to pay your monthly payments. If something happens and the modification falls through, you may be at risk of losing your home to foreclosure. If you do stop making your payments, do not spend the money. In the event that the modification does not work out and you do not lose your home, you will be responsible for the payments that you missed.
  • Are you considering a loan modification to get more manageable financing terms? Rather than trying to manage the modification on your own, consider using an attorney, or getting assistance from a housing counseling agency. The HUD website offers a complete list of approved agencies by state.
  • When considering a loan modification, it is important that you know who owns your mortgage. Does the bank own it or an out of state mortgage banker? If owned by the bank, you are more likely to receive modification because your lender will not need to seek approval from a higher source.
  • When asking for a loan modification, you may be asked to write an explanation of your recent hardship and why you need the modification. This letter should be short and precise, stating only the most important and valid facts in an easy to understand manner. If your letter is too long or too hard to follow, the lender may simply reject your request and you will be left to pay unmanageable monthly mortgage payments.
  • When shopping for a mortgage, know exactly what you are looking for to simplify the process. For example, are you looking for a mortgage with a low interest rate, or a mortgage that offers flexibility to do things such as making extra payments or repaying early? Flexible mortgages most often carry higher interest rates, so it is up to you to determine what is most important to you.
  • Are you buying your first home with plans to have children one day? Be sure to consider this when choosing a home, but also when determining how much you can afford in a monthly mortgage payment. Consider the extra expenses of having children. For example, will one of you stay home while the children are young, leaving you to live on a single income? Factor these into the equation when trying to determine how much you should borrow in a home loan.

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