All types of debt could be weighing you down: credit card bills, medical payments, student loans and mortgage payments, to name a few. To avoid bankruptcy or to keep your house during bankruptcy, one option you might want to consider exploring is mortgage modifications. Are they relatively easy to get, or is being granted one a rarity?
The good news is that many people easily get a mortgage modification, but as with anything, such a move can come with downsides.
Pros and cons of a mortgage modification
The disadvantages of a mortgage modification include your mortgage possibly being reset for a 40-year period, meaning that if you had, say, 18 years’ worth of payments left, you may turn out to have 40 years’ worth at the end. Your credit score might also take a hit, although not as bad as a foreclosure mark.
The advantages include a lower monthly payment, especially for the first few years, and such a modification can help get you through a distressing time in your life. You can file for bankruptcy, and through this reorganized debt plan be able to stay in your house.
Ease of getting one
Now to the heart of the matter: Who can most easily get a modification? Generally, those who qualify show financial hardship yet demonstrate sufficient income to make the new payments. Hardship examples could be illness, death of a spouse or job loss. Applicants must be behind on their payments or about to become behind. If you are seeking a modification in bankruptcy, the fact that many of your debts are being eliminated or reorganized should show you have some increased capacity to make payments.
Some lenders have their own departments and programs for loan modification, so you can check online on your lender’s website or contact it to find out. Otherwise, there are programs such as Freddie Mac Flex Modification that may be able to help. Also, if you have no hardship to show to your lenders, they may offer you a refinance since you might not qualify for a modification.