Have you heard that a loan modification could be the answer to your dreams? In some cases, it decreases mortgage payments and protects your credit score. However, on the other side, there are significant risks you take regarding your credit, especially if not approved for the modification. Here are the six downsides to a loan modification.
The Program Will Not Help You If Unemployed
The first downside of a loan modification is to realize, you may not qualify off the bat. The purpose of a loan modification is to help reduce your mortgage payments based on your pre-tax income. However, while unemployment is income to you, it is not considered the qualifying income under the Home Affordable Modification Program.
Submitting Lower Payments Hurts Your Credit
You should realize that once you apply for the loan modification program, the lender may ask you to make a lower monthly payment for their “trial period”. This reason could be to ensure you can handle the payment. However, partial payments are reported as such and that can have a negative impact on your credit score. If approved, be sure your lender corrects your report. If denied the loan modification, the negative marks will remain on your report. [Read the full article]