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Within the last few years, millions of Americans have been forced to learn about home loan modification, whether they wanted to or not. The foreclosure crisis coupled with an unstable economy has made being an expert on the topic crucial for many to keep their homes.  There has been a crash in the real estate market, and it has been felt by everyone.  Now with nationwide unemployment being 9.8% as of the beginning of October, things are getting no better.  Real Estate values have dropped  by one third over the last three years, making a third of home owners upside down (owing more than the house is worth) in their mortgage.

Home owners who would normally be asking themselves what color to paint the house are now asking themselves how are they going to keep the house.  The answer varies from situation to situation, but one thing is certain in all cases, action is needed to prevent foreclosure.  One of the solutions is home loan modification.

A home loan modification is when the bank agrees to change the conditions of the mortgage, allowing the home owner to stay in their home.  There are several forms these changes can take. One is a lowering of the interest rate, or changing the rate from a varied to a fixes.  Another is a change to the length of the mortgage’s duration; and even a lowering of the initial principle of the loan.

There are two approaches you can take.  You can negotiate your new loan with the bank or you can use a professional loan modification specialist.  Either way you are going to have to have certain information ready for the bank to review.

First you’ll need to know your income/debt ratio.  This is exactly what it sounds like.  The bank will need to know how much you make and what ALL of your expenses are.  Not just mortgage payments, but car payments and insurance, credit card bills, cable bills, food costs.

To qualify for President Obama’s Home Affordable Plan:  HAMP (Home Affordable Modification Program– a $75 billion initiative intended to help people afford their mortgages and stay in their homes) you must have a mortgage payment that is 31% of the gross monthly income or more.  When figuring the mortgage payment, the property insurance, taxes on the property and any homeowner association dues you pay can be included in this figure.  Even if you don’t qualify for HAMP you still may qualify for a home loan modification.

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