Loan Modification Criteria – What Does it Take to Qualify For HAMP and How to Apply Correctly

Wondering how to learn and understand the loan modification criteria for approval under HAMP and other loan workout plans? Well, you are smart if you take the time to learn the basics of these plans-knowledge is power when it comes to filling out your application. The good news is that there is a simple formula you can use that will help you qualify for a new lower mortgage payment.

The loan modification criteria used by lenders and servicers is dictated by the Treasury Department and used under HAMP for all applicants facing a financial hardship situation. Here are the basic eligibility guidelines that you must meet in order to apply:

  1. Live in the home-no investment or second homes
  2. Current payment equals more than 31% of gross household income
  3. Loan originated before January 1, 2009
  4. Loan balance less than $729,750
  5. Facing a financial hardship situation

Once you have passed the basic loan modification criteria, you will then be asked to complete an application package for review. This will include a few forms-including the all important financial statement. This is where you will detail your monthly income and expenses. Based on how you complete this form, a decision will be made if you qualify for HAMP and a lower mortgage payment.

You can learn the actual formula used to determine if you meet the loan modification criteria and use that same formula to prepare your financial statement. Think about it-if you know the method your bank will use to qualify you, then you can fine tune your own financial statement to be certain that you meet the guidelines for approval. If this sounds confusing to you, then you may want to use a software program that will do all the calculations for you. Just put in your own income and expenses and you will see immediately if you qualify or if you need to make some adjustments.

Let’s face it-most homeowners are not experts when it comes to loan modification criteria, and that is why so many companies have been charging thousands of dollars to assist borrowers. Well, you can do it yourself and be successful-just take the time to learn the basics and use tools that are available to you-modifying your own loan will save you potentially tens of thousands of dollars and get you back on track financially.