by CRESTICO | Feb 28, 2009 | CRESTICO
What is a Loan Modification?
Loan Modifications are something you have been hearing much about lately. Often, the people advertising these modifications do not explain the process clearly before they gather your information. Here is an easy to understand explanation of what a Loan Modification is.
Basically, a Loan Modification (called Loan Mod, for short) is a process that an attorney or other Real Estate professional will use to “modify” the terms and conditions of an existing loan. Currently, most of these modifications are being applied to mortgages, but could potentially be applied to any type of loan. This modification in terms generally only takes place AFTER the issuer of the loan (the lender) has granted approval to do so. Approvals are generally based on comprehensive review and consideration of all material factors.
A common reason for the request and subsequent approval of a modification arises from some sort of financial hardship that affects the borrower’s ability to repay the loan. In the current economy, where layoffs are becoming more prevalent and more and more borrowers are entering the many stages of foreclosure, many borrowers are facing very real and legitimate hardships that severely impact their ability to repay their loan obligations.
When lenders are considering granting modification approvals, they will often consider the borrower’s payment history and standing with respect to the subject loan. Most borrowers are diligent and make the appropriate payments in an appropriate manner. This will often help the lender to choose to allow a modification rather than institute a foreclosure. The foreclosure process is a timely and expensive method for recovering the property. Also, it should be considered that in the current market, lenders have many properties that are non-performing, which is to say that they have been foreclosed or abandoned, and modification may be the lender’s only option to keep a borrower paying.
Another factor lenders consider in granting approvals is, should such approval be granted, will the borrower be able to begin and continue making payments in a timely fashion under the new terms. Generally, to secure a modification, a borrower must be able to demonstrate some ability to overcome the current financial hardship and ensure that he/she will be able to pay back the loan in an acceptable manner.
Modifications may take shape in different forms. Once a lender has decided to grant approval, this approval may be either to lower the monthly payment amount, thereby making it easier for the borrower to stay current. In this case, the difference in the amount of the payments will be added to the “back end” of the loan, thereby extending the term of the loan. Also, a lender may decide to lower the interest rate on the loan, thereby reducing the payment with no addition to the total loan amount, lowering only the amount of interest paid.
Mitra Karimi-Paydar
Crestico Realty
(310) 362 – 0828 (TEL)
(877) 881-2929 (FAX)
mitra.karimi@crestico.com
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by CRESTICO | Jan 31, 2009 | CRESTICO
At Crestico Realty, we believe an informed client is a happy client, so we do our best to make sure you are informed, every step of the way! The first step we take in doing this, is to inform you before you become our client and give you a taste of our excellent customer service. Below, is information that many first time homebuyers seek from us every day.
You’ve decided to buy a home. It seems like the right and best thing to do, but why. Many first time home buyers ask us why it is better to own a home than to rent one. Renters face many challenges that homeowners do not. Primarily, if you get the right loan (which we can help you with), your mortgage should stay affordable every year and you will not be faced with one of renters’ biggest problems: rent increases. Next, why not let the place you live give you some tax benefits? Renters do not get to enjoy the same tax benefits that are associated with owning your home. If you have a family, or are thinking about having one; wouldn’t it be nice to have your kids born and raised in the same place? We all have fond memories of our childhood and our childhood homes. Kids love backyards and swimming pools and treehouses and slumber parties. These are things that may not be as accessible and as private as you would prefer them to be if you rent an apartment.
Also, when you rent, you are not making an investment, you are merely spending money. Money you spend on repairs, upgrades, decorations, renovations and rent loses its value once it leaves your checking account. But when you own a home, the money you spend on everything from landscaping to decorations becomes an investment, and you will see a return on that investment. You might say that everyone is talking about losing value and losing equity, but that’s only applicable to today’s market. If you look at the Real Estate market, over time, you will see that it is a cycle and any money you spend today will eventually regain its value tomorrow. And finally, above all owning a home means you OWN it and can do anything you like with it. You can decorate it and express yourself in a way you would not be as free to, if you were renting someone else’s property.
Next, first time home buyers find themselves faces with the question of location. We’ve all heard the saying “location, location, location!” That should give you a clue that location is very important. You will need to consider your lifestyle and your needs when determining a location for your home. Do you have children? Is the quality of the schools in the area an issue? Are you looking to join a community? Your Crestico agent can help you determine your needs and find the perfect location for you.
The next thing to consider is the money. The amount of money you will need to buy a home depends on many things including the cost of the home and the mortgage you get. Your Crestico agent will go over each and every step with you and introduce you to our preferred lender, American Guardian Home Loans and together they will explain the entire process to you. Generally, when you are purchasing a home, you will need to have cash on hand to pay a deposit when you submit your offer so that the seller will take your offer seriously. Also, you will need cash for the down payment and the closing costs (to cover the processing of the paperwork involved).
Most people purchasing a home do not do it entirely with cash. Most buyers needs loans. Choosing a first time home buyers loan can be a daunting task. It may seem overwhelming because there are so many different types of loans with different names and options associated with them. Not to worry, Crestico Realty has a dedicated representative at American Guardian Home Loans who is there only for our clients.
Finally, one more thing a first time home buyer should be aware of is insurance. Having the right homeowner’s insurance policy is an important part of being a homeowner. Homeowner’s insurance differs from renter's insurance in that it protects your home and its valuable contents from occurrences like theft, fire, floods and earthquakes (depending on your location and type of policy). There are other kinds of insurance, such as Private Mortgage Insurance (also known as PMI) which may be required, depending on your loan and mortgage terms. Your Crestico agent will work with you to get you the best value in insurance policies because Crestico Realty is your one stop shop for all your home buying needs. We are part of a network of professionals and have extensive relationships in the industry that we use every day to make sure you are getting the best the industry has to offer.
