Home Loan Modification can Reduce your Monthly Mortgage 30% or more and can Stop a Foreclosure.
As President Obama likes to say “First Off”, in order to qualify you must be a responsible homeowner. That means it is necessary that you really try and keep up with your mortgage payments. In order to qualify financially for a Home Loan Modification, your current income must be less than your expenses, and your mortgage should be more than 38% of your income. The goal of the plan is to get your mortgage down to 31% of your income. However, the lender can only bring it down to 38%. The government will kick in the rest to bring your mortgage down to 31%.
Let’s look at an example so that you can figure this out at home by yourself.
For the sake of simplicity we’ll use round numbers. Say you make $100,000 per year, and have a $3,500 per month mortgage, and you want figure out how much you will save from a home loan modification. Remember the goal is to reduce your monthly mortgage payments down to 31% of your monthly income. We need the following:
- Annual Mortgage = Your Monthly Mortgage times 12
- Annual Income
- Current Mortgage to Income Ratio
To determine your Mortgage to Income Ratio before a modification simply divide you Annual Mortgage by your Annual Income and multiply by 100. (i.e. 100 * Annual Mortgage / Annual Income)
So in the example above your Current Mortgage to Income Ratio is 100 * ($3500*12) / $100,000 or 42%
Now that we know what your current ratio is, we can figure out how much a standard Home Loan Modification of your income will save you monthly.
To figure out your Monthly Mortgage Savings we take 31% and divide it by your annual income using the example above the answer is $31,000 annually, or $2,583 monthly
In this case, your monthly mortgage payment went from $3,500 down to $2583.33 or a savings of a nearly $1000.00 per month. In percentage terms, that's better than a 25% reduction
WOW! Now everybody and their brother would want this, but do you qualify?
See my article titled: Obama’s Loan Modification Program Rules to see if you qualify.