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How Does A Home Loan Modification Affect Credit Score?

April 11, 2012 | Comments: 0 | Views: 146

During this time of economic crisis, it is always a hard task for us to budget our income. Worst, it would be unfortunate if we don't have any money left from our wages to budget at all. So it is not surprising to know that more and more homes are getting foreclosed due to unpaid mortgages. But what can we do, this is the test of times. So can we just seat around and see our homes getting grabbed by the lenders? Today, we don't have to. Because good thing we have now the home loan modification programs.

The home loan modification scheme was proposed by the Obama Administration in 2009. The goal of it is to help people modify their home loans so that they can still pay their mortgage according to how much they can afford or how they can be able to cope up with the payments. However, that depends if the individuals qualify based from mandated government home loan modification guidelines. If qualified, the lenders would give the borrowers the chance to pay the mortgage loans based from the borrowers' capability to pay. If not, the lenders and the borrowers can come to other agreement or a foreclosure cannot be avoided.

The concept of home loan modification will not totally benefit the lenders but this is better than the homeowners not paying at all. Also, in a way that the lenders would be foreclosing the homes, most likely they will have a hard time selling it because as we have said, life is harder now and money are hard to come by. So, though in the past, lenders would have no problems selling foreclosed homes, today they want to avoid this or else they lose money because there are almost no buyers.

Affecting Borrower's Credit Score or Not?

On the other hand, there is this belief that whenever a borrower take the course on getting into home loan modification, the borrower's credit rating will surely slide down. That can be true because it would be obvious that because the borrower cannot be able to pay his regular duties, it will be indicated in his credit history that his loan payment has been modified in order for him to cope up with the payment. In this case, his credit history may spell a foreboding sign to other lenders that the borrower doesn't actually have the full capacity to comfortably pay his loans. This is how a home loan modification affects the credit score.

However, it should be noted that borrowers who goes into home loan modification means they are trying their best just to be able to cope up with the payments and unlike those who just let the borrowers takes their homes through foreclosing, these individuals are still considered feasible by some lenders and therefore are not a threat to the lending institutions. So even though home loan modifications schemes can be the basis for some lenders to seriously think about providing loans for some borrowers, there are still many lenders who give loan opportunities to these individuals.

Building Back Credibility from Bad Credit Loans

Smart, honest and experienced mortgage loaners know that despite the negative effects of home loan modifications on their credit history, they can still get back on track and build their credibility again. They know that as long as they can prove they are most willing to improve and change their situation to build a better credit history, lenders would find it easy to come to a certain deal with them. Also, lenders would not easily give up on borrowers that they know are honest payers so they usually scrutinize the credit history of the borrowers and check if there was a history of home loan modification and how the borrower did managed to pay.

So if you think you should just leave your home to foreclosure because you cannot cope up with the mortgage payment, you must not lose hope. On a certain level, you can ask the lender that he will consider you to undergo home loan modification scheme. You must not be denied with this scheme because this is one of your rights. However, as mentioned, you must qualify first for this type of modification. Search the web on how to qualify and present this to your lender. If you want to understand about the advantages of home loan modification programs and how you can maintain a good credit rating, you can consult a lawyer about this. You will be guided well and will be oriented on how to avoid foreclosures.

You can also search the web and compare among the best mortgage loan modification companies which are more appropriate that can give you a better paying chance with regards to your present economic status. Nevertheless, always consult a lawyer if you are not sure what you are going up to because getting into a situation wherein you lose the capability to comply will really give you a really bad credit rating.

To read more information about bad credit home loans, visit my website at where you can find a lot of information about home mortgage loans.

Source: EzineArticles
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