If you're one of the millions of Americans at risk of foreclosure, or possibly already in foreclosure, chances are you are terrified of losing your home. The best way to approach the bank and ask for a loan modification is with the help of a foreclosure attorney. However, many homeowners decide to deal directly with the bank and take it upon themselves to submit a loan modification package and financial worksheet in order to lower their monthly mortgage payment.
Most banks will ask for two very important documents in your loan modification package
- a well written hardship letter
- a financial worksheet showing your debt-to-income ratio as well as your other monthly expenses
Applying for a loan modification can be frustrating. Keep in mind that the banks will make it extremely difficult for your loan modification to be approved. However, there are a few tips and tricks to keep in mind when filling out these important documents to submit to your bank. The first thing you should do is gather the necessary documents. You'll need:
- a recent pay stub
- last years income tax returns
- an appraisal of your assets
- instructions from your lender
Below is a sample of a financial worksheet that you can use to submit to your bank. Check with your bank to make sure the financial worksheet you submit has all of the information that your indiviudal bank is looking for before sending the worksheet to your lender.
Some things to keep in mind when filling out your financial worksheet for loan modification:
- The bank wants to see that you are able to pay the monthly mortgage amount without a problem. This means that the bank will often reject a loan modification if they think the new payment is too high for you to afford, or even if they think your income shows you are able to make your current payments.
- The bank will need your debt-to-income ratio. You can find your debt-to-income ratio by dividing your monthly mortgage payment (including taxes, fees, and your HOA payments) by your monthly income.
- Keep a copy of the worksheet for your records. It is not unheard of for banks to lose paperwork or claim that your package has been lost in the mail.
- Many banks will want to see that you've recently undergone a hardship of some kind and that it has passed. Most lenders will require a separate hardship letter explaining why you were unable to pay your mortgage. Some acceptable hardships include a loss of income, death of a spouse, or an increase in your mortgage payment.
- Take extra care if you are self-employed. If you use your car for your business and make your payments out of a business account, your montly car payment may not need to be included in your expenses and should be left off your financial worksheet.
- Put your contact information and loan number on every page of your loan modification package. This leaves less room for bank errors.
The best way to receive a successful loan modification is to complete your financial worksheet with the help of an attorney specializing in loan modifications. If you are thinking about completing you financial worksheet alone, use our sample worksheet as a guide before completing your entire loan modification package. The key to getting your loan modification approved is knowing what should and should not be included in your financial worksheet and only a professional can help you decide exactly what your bank is looking for, especially if you are self-employed.
