When they do not summarize their debt accurately most people risk not having their monthly payment reduced as low as it could be by their mortgage company in a loan modification. They may not be able to make the new payment on a consistent basis and they may find themselves falling behind on their payments and facing foreclosure all over again.
When a person requests a loan modification their mortgage company is going to send them an application to complete. One of the most crucial parts of the application is that part where the summarize. person is asked to summarize their debt. The application will contain a form to complete. On this they have to itemize all of the debt that they currently have. They need to fill this out as accurately as possible.
At first glance these forms seem to be very comprehensive. However, they may not leave areas for the person to include critical information. Most of these forms were just modified from those in mortgage applications. They were never designed specifically for loan modifications.
Typically the first thing they ask is what their monthly mortgage payment is. They may not ask if the person owns any other homes and what their mortgage payments may be on those homes.
They may ask how much their monthly car payment is. They also will ask what the cost of the insurance is. However, they may not ask how much the person spends on gas each week. When gas is $4 a gallon and the person drives 20 miles each way to and from work every day, fuel costs can be very high. Another area overlooked is the cost of repairs. If the person spends several hundred dollars for auto repairs every month, this can put a tremendous strain on the finances. Most forms don’t ask how much a person spends daily on tolls. In some areas these can be very expensive.
There will be an area on the form to list monthly credit card and loan payments. However many people facing financial challenges no longer have credit cards. They have become accustomed to paying cash for everything. They need to itemize how much they are paying for necessities on a weekly basis.
Most probably there will be a spot to list how much they pay for medical insurance and medical expenses monthly. Most people will overlook listing how much they pay for dental care, eye glasses and even pet care. The cost of cold medicines, pain relievers, first aid supplies and non prescription medicine should also be included.
Most forms will have an area to list how much is spent for child care, child support and alimony. There is no area to list how much they may be spending for care of aging parents or other relatives.
There will be an area for miscellaneous spending money. Most people have no idea of what this may include. They don’t realize that this is where they are supposed to list what they pay for clothing, entertainment and any other items not picked up elsewhere.
The person is asked to list how much they spend for utilities every month. Depending on the time of year when they are filling out the application, they may not be as accurate as they need to be. If they live in a northern state and it is summer, their gas and electricity bills may be low. They may have overlooked the fact that the winter was extremely cold and their heating bills were the highest in years.
The last item is listed as Other. This typically is a catch all where the person is supposed to list expenses not picked up elsewhere on the form. The sad thing is that most people have no idea of what to include here. So they leave it blank.
The most glaring omission on most forms is an area to include the cost of any major repairs around the home. If a refrigerator, stove, furnace or other major appliance needs to be replaced, there is no place to list the cost of this. Likewise there is no place to list the cost of a new air conditioner or repair work done around the home.
Another glaring omission is what they may be spending for tuition for their children. Normally this would be college tuition. However if their children are in private high schools, they need to add in the tuition there.
If you are facing foreclosure and feel that a loan modification will help you save your home and protect your family, please make sure to take your time giving your mortgage company the most accurate picture of your current debt as possible. Don’t rush through this. Think about where your money is going.
On a sheet of paper list all of your expenses. Go through the items listed in this article and figure out how much you spend on each one each month. Put the paper aside for a couple of hours or a day. Then review it and see if there is anything you missed.
In order to get the most favorable loan modification, you have to make sure that you give your mortgage company as complete and accurate a picture of all of your current expenses as possible. Remember – it’s your goal to save your home and protect your family. If you don’t follow through on this, you will be doing significant damage to your chances to stop the foreclosure.