A Loan Modification is a permanent change in the terms of your loan. It gives you a fresh start, and helps you avoid foreclosure by reducing your payment. The purpose of a loan modification is to enable the borrower to honor the terms of the new loan for the foreseeable future. The professionals at New South Financial will analyze your current situation and provide a workable plan that is acceptable to you and your lender.

In simple terms, a loan modification restructures the terms of a loan without actually refinancing. A loan modification is an agreement between the lender and the borrower that stipulates a long term relief from unaffordable loan terms and can drastically reduce mortgage payments.

If you have an Adjustable Rate Mortgage (ARM) that is adjusting or is about to adjust to a higher payment that you just cannot afford, a loan modification might be what you need. Most people think that they can refinance their home to take advantage of today's historically low interest rates. Unfortunately, they do not know that lenders have a growing strict criterion that the borrower must meet in order to refinance.

1) Substantial equity in your home. To qualify at the lower rate, there has to be an 80/20 Loan-to-Value (LTV) ratio in your property. What this means is the loan will be no more than 80% of your homes total CURRENT market value; 20% equity has to remain in your home. In today's failing real estate market, homes are losing value at historic rates. If you do not have 20% equity in your home, you may still qualify for a loan, but not for an affordable program. Your loan will be at a substantially higher interest rate, with high mortgage insurance premiums at an expense similar to when you originally purchased the home. Or the difference in equity MUST be paid out of your own pocket.

2) 700+ Credit Score. Another factor that must be met is your credit score. Lenders are only offering those low advertised rates to those borrowers who have credit scores above 720. Anyone whose credit score is not stellar will receive rates with substantially higher interest or you may have the opportunity to 'buy down' your rate with the purchase of 'points'. Points were designed to buy your homes rate down at a fee of one, two, or three percent of your home loan's value. For example, a $400,000 home with a three percent buy down feature will cost the borrower $12,000 out of your own pocket! Just for the opportunity to lower your rate by three quarters of a percent.

That is where New South Financial comes in. We will work with your current lender to try and negotiate the best possible rate and terms that would best suit your current situation.