Author : Justin McHood
Many people who are current homeowners are familiar with most of the basic mortgage terms. Terms like mortgage amortization, annual percentage rate and loan programs are pretty common knowledge. When you introduce some of the terms associated with loan modification, most people aren't as knowledgeable. That is one of the main reasons that the term loan modification is so confusing for many homeowners who are looking for a loan modification attorney to help them.
The good news is that you don't have to be a financial expert to know enough about loan modification to have a working knowledge of it. Here are just a few important topics to know when learning about loan modification.
Debt-to-Income Ratio: May sometimes also be referred to as DTI. Your debt-to-income ratio is the amount of money that you pay towards your total debts compared to your income. FHA guidelines dictate that generally speaking your debt to income ratios should be 29% on the front (mortgage debt only)and 43% on the back (total debt).
Deed-in-Lieu: Also sometimes called Deed-in-Lieu-of-Foreclosure. This means that rather than a foreclosure, the lender agrees to accept you to deed the property back to them in exchange for not foreclosing on the property.
Fair Market Value: This is what the lender will arrive at where they will be willing to sell the house in a short sale. Fair Market Value is usually arrived at by ordering a Broker Price Opinion (BPO) from a local real estate broker.
Foreclosure: Depending on what state you live in, the foreclosure process will be different. Generally speaking, a foreclosure is where your property is sold and the proceeds go to the lender which will allow them to recover part of the loss on your loan.
Forbearance: Forbearance is a temporary solution for borrowers who are having trouble making their mortgage payment and is an agreement where the lender agrees to revise the monthly payment for a period of time to allow the borrower to "catch up". Forbearance may involve any number of options including lowering your monthly mortgage payment or even agreeing to suspend your mortgage payment for a period of time.
Principal Balance Reduction: When talking about a principal reduction, the lender agrees to write down the principal balance of the loan in order to reduce your mortgage payment. Lenders don't do principal reductions very often and they usually offer a different type of loan modification first.
Short sale: Short sales are a popular way for people to avoid going into foreclosure.When you short sale a home, the owner agrees to sell the home for less than than they owe on the home and give all the money to the lender. The main reason that many people choose to short sell their home versus let it go into foreclosure is because under current guidelines you can buy a new house again in a shorter period than if you go through foreclosure.
Justin McHood is a loan officer in Phoenix, Arizona and often refers clients to a local loan modification attorney to help them with their loan modification needs.
Article Source: http://EzineArticles.com/?expert=Justin_McHood.
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