You can avoid losing your home over foreclosure by opting for the government mortgage modification programs. These programs are administered by the U.S. Department of Housing and Urban Development (HUD). One of the federal mortgage debt relief programs is known as Home Affordable Modification Plan (HAMP).
What is HAMP?
The federal mortgage loan modification program has been devised by the Obama Administration such that a struggling mortgage borrower will only be required to pay 31% of his/her monthly gross income. Primarily, HAMP has the following advantages:
– Extends the maturity deadline of the mortgage loans.
– Reduces the rate of interest on them.
– Cuts down the principal loan amount.
How to qualify for HAMP
You can use various online mortgage modification tools in order to find out whether or not you’ll qualify for the HAMP or any other mortgage debt relief programs. However, you can check out the below mentioned list in order to know about the HAMP’s eligibility criteria:
– The first mortgage loan should have been taken before 1st January, 2009.
– The lender should be wiling to work and participate in the HAMP program.
– Monthly mortgage payment of the borrowers must be more than 31% of their gross monthly income.
– The house should be the principal home of residence of the distressed borrowers.
– The total outstanding balance should not be in excess of $729,750 for single unit properties. However, this cap is higher in case of 2-4 unit properties.
– Borrower is unable to stay current with his/her mortgage payments.
How to apply for HAMP?
Here is a 3-step guide to apply for a HAMP:
As soon as you realize that you won’t be able to keep up with the monthly payment, act at once in order to resolve the issue before it is too late. You must gather all your financial information like present monthly income and expenses before applying.
Find out all the details about your mortgage, loan agreement terms and the lender.
Once you’ve completed the above steps, you may get in touch with a HUD-approved housing counselor for some free advice and to know about the various other debt relief alternatives, besides the HAMP.
Mortgage modification and credit score damage
Many a times, it has been found that due to lack of proper co-ordination between the borrowers and the lenders, it is the credit rating of the borrowers that suffer the most. This is because most of the times banks ask their borrowers to stop making the monthly payments.
This skipped monthly payments starts to show up in the credit report, thereby resulting in a damaged credit score. The notion that plays out here is that if borrowers keep making the monthly payments, then it confirms that they are not undergoing any kind of financial hardships.
However, borrowers can improve their credit score as well as credit rating by making timely mortgage payments or for that matter any loan repayments. Moreover, they need to avoid making too many hard enquiries within a short span of time.