How Do I Qualify For Debt Settlement ?

The Federal Government and many of the largest lenders have agreed that mortgage Debt Settlement is the most cost efficient and streamlined option to help homeowners stay in their home.

Although every struggling homeowner would like to receive a mortgage loan modification, not everyone will qualify. Each lender has developed guidelines to determine which borrowers will qualify for modification assistance. Homeowners must submit an application that documents their ability to meet those guidelines before their loan will be modified. Borrowers seeking help must meet debt ratio guidelines, demonstrate a hardship situation and provide certain required application forms and income documentation to prove their eligibility.

Debt Ratio Guidelines: 

Knowing how the mortgage Debt Settlement process works and learning your lenders guidelines will help assure a good chance of approval. Once you have a good understanding of what your lender needs to see on your application, you can get to work on preparing an accurate and acceptable application. Verify with your lender what their debt ratio guidelines are-most lenders want to see a ratio of 34-45% of your gross monthly income for the new modified loan payment, including taxes and insurance. The federal stimulus modification plan targets a 31% ratio for the new modified payment.   You can compute your ratio before submitting your application so that you can make any necessary budget adjustments to fall within the acceptable guideline.  You may need to adjust items like your groceries, gasoline, miscellaneous expenses so that you can prove that you have enough money to pay the new payment and have a little bit of disposable income left over each month.

Financial Hardship Guidelines: 

A financial hardship must also be demonstrated to your lender before a mortgage Debt Settlement will be granted. A loss of equity alone is not a valid reason for a loan workout.  Each borrower has a unique situation, however some of the generally accepted hardships include:

• Loss of income-job loss, reduced hours, etc./increased expenses
• Divorce or separation
• Military service
• Death of family member or co borrower
• Illness, medical expenses
• Natural disaster

A well written and convincing hardship letter is an important part of a successful mortgage Debt Settlement application. Your lender will be willing to grant your modification application if you can demonstrate an ability and willingness to make the new lower loan payment now and in the future.  Make sure you cover the 3 critical elements that your lender needs to know in your own hardship letter by following a simple Hardship Outline.

Your goal is to learn as much as you can about the process before you contact your lender so you will be prepared and able to meet their guidelines. Take the time to do your homework and your time and effort will be well spent. Thousands of homeowners have gotten the mortgage Debt Settlement help they needed, you can too!