Loan Modification – Is your deal good or bad?

If you’ve just completed a mortgage modification or in the market for one, you want to learn all you can. You’re probably wondering how to tell whether a home loan modification deal is good or bad. Regardless of what stage you’re in, you’ll want to be sure what you’re getting will actually help you when its over. How can you determine this?

Because loan modification is a fairly recent development in the financial industry, a few standard comparisons have emerged. There’s no specific table you can look at to see what the proper interest rate should be or anything like that.

Loan originators are not under any obligation to provide loan modifications to you at all. In some situations, the fact that you were able to get any kind of deal at all may be good enough. In other situations, you may be digging yourself into a deeper hole that you cannot get out of.

The closest thing to a standardized evaluation approach is the “31 percent test,” which comes from studies performed by the FDIC which have shown that a healthy monthly housing payment is one that is less than 31 percent of your total monthly household income. You shouldn’t be paying more than 31 percent of your money to your home. This is the closest thing to a guideline that exists in this industry. If your monthly household income is $2500, you shouldn’t be paying more than $775 in housing expenses. If your loan modification payment is higher, you may have cause to question whether you got a good deal. But this is just a general principle.

The best way to determine whether you’re getting a good deal is to perform what some call the “real life test,” which basically asks the question, “Did it work?” Did your loan modification save your house from foreclosure and get you back on your feet financially? If so, then your mortgage restructure was successful for you. If you’re able to keep your house rather than see it lost to creditors, then you know you’ve gotten at least a decent deal on your loan modification.

To find the best deal, contact a trustworthy professional in the field. There’s no better way to navigate the complex, unstructured waters of mortgage modification than to work with someone who knows the industry.