Debunking the Myths About Obama’s Home Loan Modification Program to Make Homes Affordable

While loan modifications are more common during this economic downturn, they have long existed as an option for homeowners facing financial difficulties. With so much media attention on the subject, people need to be able to separate the truth from the false information on the topic of home loan modifications.

A new federal law has standardized the method by which lenders qualify and approve loan modifications for homeowners facing financial difficulties. This legislation came out of the Making Home Affordable (MHA) Plan which the Obama Administration turned into law. The MHA plan offers homeowners the opportunity to apply through the end of 2012 to modify their home loans.

The MHA plans to assist between four and five million financially strapped homeowners modify their mortgage loan payment terms with $75 billion that has been set aside for this program. Foreclosure is the least desirable option of both the homeowner and the mortgage lender, so loan modifications are a better option for both parties.

Despite what some people may have heard or think, the government is not forcing lenders who do not want to participate to take part in this plan. There are incentives for banks that choose to participate in the loan modification program and certain procedures that have to be followed, but a mortgage lender does not have to participate in the federal program if it does not desire to do so.

Because foreclosure is never in a lender’s best interest, most mortgage banks are as eager to participate in the federal loan modification program offered under the MHA plan as are the homeowners who are facing financial difficulty.

Because the federal loan modification program has requirements such as only applying to first mortgages on the lender’s primary residence, real estate investors or speculators can’t participate in this program. The purpose of the MHA is to allow homeowners from losing their homes and not to help house flippers get financing to acquire new properties.

As the MHA program reaches out to more homeowners facing financial difficulties, more information will spread to dispel the rumors and misconceptions about the federal loan modification program. It’s common to be wary of something new.

The Making Home Affordable plan can be a welcomed answer for homeowners in fear of losing their houses to foreclosure. Before writing it off as a possibility, get more information about how you could reduce your monthly mortgage payment through a home loan modification.

Tips to Increase Your Eligibility For a Home Loan

Home loan seekers aiming to derive maximum benefits from a home loan usually look for the maximum loan amount to minimize the marginal amount that they have to invest. As the banks carefully probe into the financial history of a home-loan seeker, it is very important for him/her to be completely aware of requisites, and terms and conditions that banks usually consider before approving a home loan.

The following are few important tips that help you in getting a beneficial home loan:

Income and Liabilities:

  1. A home loan seeker should close all the liabilities which he has in his bank statement and payslips if possible.
  2. Mention the liabilities that you want to close to avail a home loan.
  3. Mention the balance tenure of the loans for which the repayment period is more than 12 months and which you don’t want to close.
  4. Also mention the loans for which the repayment period is less than 12 months. Great importance must be given to this factor and must be provided without failure.
  5. Submit the proofs of your additional income like bonuses, reimbursements and rental incomes etc.

Credit History:

Credit History is another important area that banks usually look into before funding for a home. If a home loan seeker has any discrepancies in his/her credit history then banks give least importance and at times not even consider the application for a home loan. Hence home loan seeker must take utmost care in this regard to avoid disappointments.

Banks usually look into CIBIL (Credit Information Bureau (India) Limited) report before considering a candidate for a home loan. So it is very important to give good attention to this factor. The following are few suggestions to home loan seekers in this regard:

  1. Make sure that all your loan payments are done without any bounces.
  2. Make sure that you check your credit amount on your credit cards regularly and repay promptly.
  3. Convert any high value transaction into EMI’s if you are unable to make the payment within the given time before the statement pertaining to your credit card is generated.
  4. Avoid late payments as they not only charge late payment fees but also spoil your credit history.
  5. Ensure that you clear all your dues and over dues before applying for any loan.
  6. Transfer your balances to another account (card) if you have the provision to make payment with in a period of 90 days (interest free period).
  7. If you have made any credit card settlements then keep all the receipts of payments made towards those cards for future references.
  8. Don’t issue any cheque if you do not have sufficient funds in your account.

Home Loan – Did You Collect Your Home Documents?

A very serious issue!

One in every six home loan applicants fails to repossess the home documents once they have paid the complete loan amount. Do not sit back and relax once the loan is repaid. Follow the set procedure. It will always aid you in the long run. As mentioned before, it is an integral part of the procedure to repossess your documents at the end of your relationship with the bank loan.

Home Loan – Which documents should you collect

This consist of the documents of the owner’s coverage, title insurance, loan papers, the statement and other contact papers. Procuring a no-dues certificate and a settlement statement is a must. These documents state that your record is clear and you do not have any outstanding dues on your home loan.

Home Loan – Watch out for any penalty

The credit bureau reinforces the requisite for this certificate. A borrower often tends to overlook major glitches like a bounced or delayed cheque as loans such as this, span over a long period ranging from 120 to 180 months. However, a penalty sometimes amounting to thousands of rupees is levied by the bank. Failure to acknowledge these additional charges would, in turn, have you tagged a defaulter. A home loan could take up to 10 to 15 years to mature.

Home Loan – Title of the deed

The absence of technology obstructed the computerization of the registration of property. Thus, the registrar may face a challenge while procuring your documents and at times, might not send them at all. In these cases, the bank needs to contact the registrar and procure all the necessary documents to terminate the loan. The Title of deeds holds equal importance when you have paid off your loan. If you need to put your house on the market, this document would provide ample information as it traces the title of the property for 13 years at the least.

Housing Loan – Ensure the house is in your name

In conclusion, do keep in mind that it is of prime importance to possess all the title deeds which confirm that you own the property and have the right to sell it. Sellers need to pledge the original deed when they procure a home loan. It is only right for a prospective buyer to request for the original documentation and not photocopies. Always follow procedure. It would do wonders for your financial life.