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  • mortgagerescueHave you ever wondered how a loan modification works? How banks and government agencies decide who gets approved and who gets busted? If you have, you are in luck. This article will look into how large lenders, such as Chase and Bank of America, analyze your loan application. This can help you make the right steps to increase your chances of getting your loan modification application accepted.

    First things first. What is a loan modification? A loan modification is a permanent change in the terms of your mortgage. Typical modifications include the term or length of the loan, the balance borrowed and the interest rate. It is generally used by borrowers who have negative equity (or very little equity) and are struggling to make their mortgage payments. If your credit history is good and you do have equity on your home, you are more likely to apply for a mortgage refinance than a loan modification.

    To qualify for a loan modification you must pass four steps with your lender.

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    First, the really boring part. After visiting your bank branch or phoning their customer service number your bank will prepare a loan modification package, a checklist of documents and start oiling the cogs of their underwriting department. Your bank will determine your eligibility, prepare an application form for you, provide you with a checklist of all the documents you need to providfeThe review process for a loan modification can vary in length.

    Second, once you fill in the application and you wait. Chase claims their review process could take up to 30 days to review a loan modification in this stage. Other banks offer similar estimates.

    Step three is the trial period. This is a three-month trial period set by the FHA to assess if a homeowner can afford their mortgage and qualify for a FHA-approved mortgage. The trial lasts for three months. During this time you should not be late or fall behind in your payments or you will not qualify for the modification. Remember, in this stage you are proving your lender and the FHA what a great borrower you are and how justified they are to bet on your trustworthiness as a lender.

    Step 4 is Christmas day, if it ever arrives. Once you complete your three-month trial and provide your bank with all the required documentation you will have to wait for 30 days for a full review of your loan modification.

    Now is when the waiting game begins. You could wait up to another 30 days before you get an answer. You will most likely be asked to provide a full medical review. After a maximum of 30 days you will receive proof of your final loan modification contract after which you can start enjoying the benefits of your loan mods.

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