Mod Success

What is a successful modification? Of the many aspects of a loan that may be modified, what factors must be present for it to be considered a success? The answer is that it must, first and foremost, be affordable.

When applying for a loan mod, one must have at least a basic idea of what one must accomplish in order to be able to afford the payments. This requires knowing exactly what one can afford, in dollars and cents. You should go into the process with your eyes wide open, and with two numbers in your head: Your ideal payment, and the most you can comfortably afford. The reason for this is so that you don’t get caught up in percentage rates and other useless ideas.

Assume that you have a current payment of $1600. $1000 per month is your ideal mortgage, but you can live with $1300, gives you a better idea of what you are really getting when the lender offers a mod package. If you are only looking at the interest rate, it may seem like the lender is giving you a great deal by dropping the rate 3 points, but if the new payment is beyond your threshold, have you really been helped?

Having a specific range in mind from best possible, to unacceptable allows you to look at the bottom line and see immediately if the new payment falls within the acceptable range, and allows you to make an educated decision, rather than just taking what seems like a good deal. No matter how good the deal appears, if you can’t afford it, it will not help, and you will wind up in the same position later on down the road.

The two main goals of a loan modification are to bring the loan current, and prevent future delinquency by lowering the monthly obligation to an affordable payment. Knowing exactly what you can afford will help to ensure success.