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Nationwide, people are losing their homes at an alarming rate. Foreclosures are becoming so common within our society that it's obvious that the US economy is in pretty poor shape. The loan modification process has already given thousands of Americans a decent shot at holding on to their homes.

Nationwide, people are losing their homes at an alarming rate. Foreclosures are becoming so common within our society that it's obvious that the US economy is in pretty poor shape. The loan modification process has already given thousands of Americans a decent shot at holding on to their homes. A home loan modification helps families in financial distress by enabling a restructuring of their mortgage which results in more affordable mortgage payments.

Foreclosure is something that no responsible person wants to experience. This is especially true when great sacrifices have been made to acquire the home in the first place. Banks want their payments, and they most often care little about what happens to you and your family. When you miss payments for two or three months, you can quickly find yourself facing foreclosure proceedings. In these challenging times, there are options available to you that could help you avoid foreclosure. Here are the options:

Refinancing

If you have equity in your home, refinancing becomes a realistic option. However, it has become very hard to qualify these days. For instance, You may have an easier time to qualify if:

(1) You have an excellent credit score (usually in the mid-700s),

(2) You have earned some equity on your home so that your loan-to-value ratio (mortgage amount divided by appraised value of property) is lower than 80%, and

(3) Your monthly mortgage payment is not more than 38% of your monthly gross income before refinancing.

Home Loan Modification

This process has proved to be successful for many families intent on saving their homes. A mortgage modification can have one of more of the following terms:

The loan modification option allows you to avoid foreclosure while at the same time giving you the chance to repair your credit. This is an obvious and important benefit and distinction vis-a-vis other options such as short-sale and foreclosure.

Establishing a new repayment plan

With a repayment plan, your lender will add the missed payments onto the next future payments. This gives you the opportunity to repay the past due amounts that you have missed. If you have missed many payments, the lender will try and offer you a repayment schedule where you must pay upfront part of the missed payments, and the balance amount will have to be paid off in different portions with each subsequent payment during the repayment schedule.

Short Sales

A short sale is a sale of real estate property in which the lender (mortgage holder) agrees to accept a payoff for the mortgage where the proceeds are less than the balance owed on the property's mortgage loan. This can occur for two different reasons (1) when the borrower (mortgagor) is unable to pay the mortgage loan on their property as agreed upon in the mortgage statement, or (2) when the borrower decides to walk away strategically because he/she does not wish to be for an underwater house because the amount owed on the property exceeds the property market value.

Strategic defaults have become very popular during the last few years of the housing crisis (2009-2011). For a short sale to happen, both the lender and borrower have to agree to the short sale process, which avoid foreclosure. The downside of short sale is that it doesn't necessarily release the borrower from the obligation to pay the remaining balance of the loan at a later time - this is known as the deficiency. The borrower needs to negotiate with their lender and ensure that the lender has waived the short sale deficiency balance. This should be signed and executed in writing by the lender.

A Deed in lieu of foreclosure

A Deed in lieu of foreclosure (DIL) is a solution to help borrowers avoid foreclosure whereby:

Conclusion

There are numerous options available to homeowners who choose to pursue a home loan modification plan. The bottom line is that a struggling homeowner need not feel hopeless. Practical strategies exist that can aide in the recovery from a significant financial setback.

For more information on loan modification software, please visit www.mycaal.com.

Article Source: http://EzineArticles.com/?expert=Carla_Ghosn

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