As the housing crisis hit, many homeowners turned to a loan modification as a means of keeping a home. However, there are several factors and truths about the loan modification process that Florida homeowners may want to investigate before thinking it is the only option. While a loan modification can be helpful, without proper guidance and facts, a homeowner may be missing out on more appropriate options such as filing for bankruptcy.
One truth about a loan modification is the impact on a credit rating. In order to qualify for a loan modification through a lender, a homeowner needs to be behind at least 90 days in mortgage payments. This immediately affects a person’s FICO score and that can lead to other financial strain.
A loan modification is also a temporary solution to what may be a serious financial crisis for a family. The principle on the mortgage will not be reduced through a loan modification. For those who owe more on a house than it is worth, staying in the house thanks to a loan modification may not make economic sense in the long-term.
Under the right circumstances, a loan modification can be lifesaver for a Florida family. However, no one should think it is the only option when a financial crisis, such as unemployment, has made it difficult for a family to keep up with a mortgage. Other options, such as bankruptcy, can help homeowners discharge other debt, thereby making it easier to keep up with a mortgage or regain some stability in all financial matters for the future.
Source: Fox News, “Will a loan modification solve your problems?“, Robert Massi, July 17, 2015