Loan modification qualifications are the criteria that mortgage borrowers that have suffered a major financial crisis have to meet to modify their existing loans and terms. What the mortgage company deems as a major financial crisis, or any additional criteria that the mortgage borrower must meet, can and does vary from lender to lender.
The first qualification is that the borrower has to prove that they are no longer able to afford to make their mortgage payment. The reason is because of the major financial crisis they have suffered. One extenuating circumstance that falls under loan modification requirements includes a significant increase in the interest rate on the mortgage.
Generally, this occurs when a fixed rate mortgage turns into an adjustable rate mortgage or an adjustable rate mortgage adjusts to a point that the monthly mortgage payment is too high for the borrower to afford to continue making the payments.
Another major financial hardship that lenders use as one of its loan modification qualifications is the loss of a job. Typically, this is the loss of a job of the primary breadwinner in the household. If it is a two-income household and the second income is not enough to cover the mortgage payments and the rest of the bills, then most mortgage companies will at least consider this as a financial hardship that qualifies for a loan modification.
Loan modification qualifications are include borrowers that experience a significant increase in expenses. A significant increase in expenses can occur for various reasons, but may include emergency situations, such as a natural disaster that causes major repairs on the home and the borrower does not have the insurance coverage to fix it.
Another loss of income to a household may occur if there is a death of the primary income earner of the household. Again, if the household requires two incomes in order to cover all of the expenses, including the loan, then this may be another one of the loan modification qualifications that gets the borrower approved for the modification.
A major illness or disease is another factor that a lender may consider as one of the loan modification qualifications. This is especially true if the borrower does not have health insurance or adequate health insurance to pay for all of the medical bills, prescription drugs and other expenses that come with having a major illness or disease, along with major medical bills and expenses.