Debt Settlement Myths & Facts

During a Debt Settlement homeowners can attempt to negotiate the following terms of their mortgage agreement: Interest rates, principal balance, duration of mortgage loan, and a few other situation specific mortgage terms. With the creation and sudden explode of mortgage modification requests, many homeowners are getting misinformed about some basic mortgage modification facts.

Here are some basic facts regarding home mortgage modifications.

Fact: A mortgage modification is when you modify one or more terms on your existing mortgage into affordable payments each month. A loan modification can be a blessing for homeowners who can no longer afford their current mortgage payments.

Fact: A mortgage modification can help homeowners avoid foreclosure and forgive missed mortgage payments. A Debt Settlement can turn a high adjustable rate mortgage into an affordable fixed rate mortgage at a lower interest rate.

Because the Debt Settlement process has become so popular among struggling homeowners, many myths about mortgage modifications have aroused. This article is designed to help debunk many of the  myths floating around the internet regarding home Debt Settlements.

Myth: You need to be late on your mortgage payments to qualify for a loan modification.

If you are still current on your mortgage but need a Debt Settlement, you will need to prove to your lender that you won't be able to afford your mortgage payments for much longer. Whether it be because of loss of job, divorce, death, or any other hardship that will cause you to default on your mortgage payments in the near future. It is true however that a mortgage modification is easier to achieve if you are already delinquent on your monthly mortgage payments. They banks already know that you cannot afford to pay your current mortgage payments. The disadvantage of homeowners who are current on their mortgage trying to modify their loans is they have the burden of proving they will not be able to afford their mortgage in the very near future.

Myth: Your lender will rather initiate foreclosure on your property than approve a Debt Settlement.

Your lender wants to avoid foreclosure until absolutely necessary. A foreclosure is an expensive and drawn out process for your lender. They need to shell out the expenses of finding a buyer for the home and all the costs associated with selling the home. In addition in today's current housing market, most homes will not sell for what they were once worth. This seems to be the greatest burden for lenders. The biggest problem lenders have with approving Debt Settlements is there is no guarantee that the homeowner will not default again on their mortgage. This will set the lender back many months and cause many expenses for them. Most lenders will rather work something out with homeowners to get them back on track and paying off their mortgage balance as soon as possible.

Myth: My Credit Score Will Drop After A Debt Settlement.

Your credit score will not suffer as a result of the mortgage modification process for most banks. The only way your credit score will be affected for sure during the loan mod process, is if you defaulted on your mortgage payments.

Hopefully this article has shed some light on the Debt Settlement process. There is so much information floating around the internet, it's becoming very difficult to distinguish the incorrect and out-dated information from the true information.