Those of you who do not know what a mortgage modification is are going to get a crash course today. They are simply a reassessment of a homeowner’s mortgage, in which their loan is evaluated against their income and other debts, to see where they fall and if any changes can be made to make it more affordable. The benefits of this are twofold: 1) it helps homeowners keep their homes, and 2) it helps homeowners avoid considering a foreclosure or even a short sale.
With anything there is a risk, or possibly a shortcoming, and in this case the shortcoming is that modifications don’t always work. Ideally, they are looking to get someone’s debt to income ratio to at least 31% total, but with the level of debt most Americans have, that isn’t always possible. In fact, only 9% of modifications are approved, which leaves a large percentage of people out there looking for other options.
The Purpose of Principal Reductions
Principal reductions are certainly helpful in an economic downturn, where the values of homes are falling and taxes are going up. A principal reduction is beneficial for those who aren’t struggling with their payments, because its benefits are two-fold as well. The reduction in principal means that not only would the principal balance go down, but those who are upside down in their mortgage would nearly breakeven, or in some cases they would be on benefit from owing less even though they are in the positive right now on value.
Either way, these changes would be good for our economy, and great for the homeowner. It almost seems that it would make us look stronger as a whole across the country, but naturally nothing is free and there are always concerns with any changes that are drastic.
You can find out more about getting a better loan, or a purchase loan by going to www.fhaloansnow.net. You will get the help you deserve with a professional mortgage banker and a realtor.
-Mayer Dallal
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