Terms To Know About Loan Modification

Chances are that if you currently own a home and have a mortgage, you are at least generally familiar with many of the mortgage-related terms.  Terms like mortgage amortization, interest rates and loan programs are pretty common knowledge. When you introduce some of the terms commonly used with loan modification, most people aren’t as familiar with them.  That is one of the main reasons that the term loan modification is so confusing for many homeowners who are looking for a attorney who specializes in loan modifications to help them.

Luckily you don’t have to be a financial expert to learn about loan modifications. Here are just a few important topics to know when learning about loan modification.

Debt-to-Income Ratio: Also sometimes referred to as DTI. Your debt-to-income ratio is the amount of money that you pay towards your total debts compared to your income. FHA guidelines state that your DTI guidelines should be 29/43%..

Deed-in-Lieu: Also sometimes called Deed-in-Lieu-of-Foreclosure. It means that rather than proceed with foreclosure, the lender agrees to accept the property back to them in good condition.

Fair Market Value: This is what the lender will arrive at where they will be willing to sell the hosue in a short sale. Fair market value is determined by ordering a broker price opinion — also called a BPO from a local real estate agent.

Foreclosure: Depending on what state you live in, the foreclosure process will be different.When a foreclosure happens, the lender sells your home and keeps the proceeds.

Forbearance: Forbearance is a temporary solution for borrowers who are having trouble making their mortgage payment and is an agreement where the lender agrees to revise the monthly payment for a period of time to allow the borrower to “catch up”. Forbearance can be any number of options that your lender determines where your monthly payment is lowered or even suspended.

Principal Balance Reduction: Principal reductions are one of the least popular options because of the direct loss to the lender when the directly reduce the amount of money that you owe on the principal balance of your loan. Lenders will usually try other options before offering a principal reduction – if at all.

Short sale: Short sales are a popular way for people to avoid going into foreclosure..When you short sale a home, the owner agrees to sell the home for less than than they owe on the home and give all the money to the lender.. The main reason that many people choose to short sell their home versus let it go into foreclosure is because under current guidelines you can buy a new house again in a shorter period than if you go through foreclosure.