Loan Modification - - Minimum Income Required

[BusterCajun]

What would be the minimum income required (self-employed, have bank statements for proof of income) to possibly be granted a loan modification. (Current loan is not Freddie or Fannie, it is serviced by a Loan Servicer).
Home mortgage of $485k still owed. Matures in 15 years. (I've read that some modifications start the terms all over so could stretch out term to 30 years or even 40 years)

 

[Survivor_IN]

IDK. You can do the math on different amortizations at different rates and lengths here.
Amortization Calculator
Typically, past due payments would be deferred to the end of the term or sale, whatever comes first. Whatever you do, don't inflate your income. Base a mod off 2 years average income to help the fluctuation of self-employments. If you try to inflate income to qualify, then your resulting payments will be higher. If you need additional income, you may need to provide the spouse living with you if you want *their income* calculated to increase your standing. However, in these situations, this might not be the best move as that too would increase the ultimate modification payment.

I really don't have much knowledge on current practices or trends as not too many people are reporting such at this time. It does depend on if it's government loan such as FHA or a private lender.

 

[BusterCajun]

Yeah, definitely NOT wise to inflate!!!
I wonder approximately how low income brought in from self employment would a loan service provider even consider granting a loan modification on $485,000 because if what I've been earning since the pandemic is too low for them to consider I either don't put myself through the stress of applying...or I work overnights too to earn enough to make it..

 

[Survivor_IN]

I think if you spread out the balance over 30 years, it would likely cut your payment in half. 20 years might be the better option so you can pay down faster and still have some reduction in monthly payment. I don't think, in general, lenders like to change terms of loan "due date"... but they may possibly amortize it to 40 years leaving a balloon on the balance at 15 years. Hopefully you will have a plan on that.

Also, sometimes the taking of personal financial information (as part of an application for mod) is meaningless as their options are what they are. It's a bit of a forced choice but they want to see your current numbers anyway.

OH! Save money in bank on missed payments meanwhile. This will help secure future payment buffer on self employment ups and downs and offers some security. In the HAMP days, one was allowed to save up to a certain amount and still be elligible for a modification.

 

[Survivor_IN]

Mortgage Calculator

Here's Clips from the mortgage calculator and more thoughts on income--- This shows that the 40 year term at 4.48% payment is 2174 (but if your taxes and insurance are higher percentage than estimated this increases the payment) So roughly, your original loan payment is about this amount at a 40yr amortization with a 30 year balloon of approx 209K. You would need enough to support roughly this payment. Times 3. (2174x3=6522/mo income) As someone else said, this may be 40% ratio. Roughly, you need 5-6K per month to be comfortable on the payment. But a minimum of 4200/month would support a 50% ratio of income to mortgage. Some lenders do this but the 50 percent ratio on *mortgage* being "affordable" has changed. Another way is to calc 50% - 55% ratio on ALL debt instead - such has including auto pay and insurance too. (called backend) Do not count income that is not steady like room mates or random Ebay business. This is bonus irregular income not steady income. You can add these later once you have a goal to meet. For now bank any excess where you can. Try to obtain a regular consistent 4-4500 and go from there. Also check the calculator to see if a reduction in percentage rate will lower your payment. In general, the mod should reduce your payment a few hundred or it won't help matters. This may be the option you get and/or balloon at the end of whatever has been missed. At least you will buy time to increase your income and possibly refinance before the balloon is due in 15 years.

Since you are in California, you likely have a higher insurance and taxes. (500K is the Taj Mahall in the South, but I'm sure your property is likely NOT SO in your area. lol) I have discovered taxes are based on loan amount, so this amount will be based on your original loan and property sale and may increase periodically with city/state legislation or "reviews" form your local Property Valuation Admin. You can actually dispute this amount and lower it if your property needs work... but you have to follow the rules on it. This can possibly lower your overall payment *after* the modification. It is the only thing you can control independently.

 

[Survivor_IN]

Also worth noting that sometimes, lenders use the local property value amount when doing a reduction in principal on a modification. This figure could inadvertantly bite you in the butt if it's too high or too low. I don't think current modifications use a principal reduction though. Most will capitolize past due (increase principal amount by adding the debt) or place past due on end of term in form of balloon due at sale or refinance.

 

[asaani]

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