| By :
Mark Etinger
Homeowners across the country are realizing that the most effective way to avoid foreclosure is to pursue a home loan modification. A modification can make your monthly payments more manageable, decrease your interest, and in some cases forgive penalties for delinquent payments. Some homeowners try to negotiate refinancing options on their own, while others turn to loan modification companies. Whether you are seeking professional loan modification help or not, there are certain steps regular homeowners can take that will aid the modification process once it arrives. - Know when you're eligible. There are lots of ways to qualify for a home loan modification, as defined by the Department of Treasury. Primarily, home loan modifications are designed to help people with significant mortgage debt in relation to their income. The cutoff point for this debt is generally 38 percent of income and higher, and the goal of the loan modification help is to reduce this number to 31 percent or lower. Homeowners who are "underwater" in their mortgages, meaning their houses are worth more than they owe, are also eligible. - Know when you're absolutely not eligible. The federal government is working hard to provide incentives to lenders to encourage them to participate in home loan modifications. Still, these incentives do not cover everyone. If you're having mortgage problems with a second home, for example, you're out of luck. President Obama has also said the government "will not reward folks who bought homes they knew from the beginning they would never be able to afford." - Rent a room. If you're having trouble affording your mortgage payments, just imagine how much an extra several hundred dollars in monthly rental income could help. Plus, many banks are more willing to commit to a home loan modification if the homeowner has demonstrated an increase in income. - Keep track of your paperwork. During a home loan modification, your bank won't be willing to adjust anything until you provide certain documents, including a proof of income, hardship letter, bank statements, monthly bills, and tax forms. If you're trying to set up a home loan modification but you haven't missed any of your mortgage payments, your case will also benefit from a loan review or mortgage audit. - Find a job. Any job. In this economy, getting a job is certainly easier said than done, but even a small part-time or freelance position could help show the bank that your income is on the rise. If you already have a job, try to pick up a second job. Most important, if you are looking at loan modification companies, it's important that you make sure you're trusting your financial wellbeing to a reputable business with experience helping home mortgages refinance. Loan modification companies are not allowed to accept payment until after your home loan modification is complete, so if a company tries to get money from you upfront, it's a scam!
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