Is it Possible to Get a Loan Modification on an Investment Property?

They say it couldn't be done, but I managed to get a loan modification on my investment property. Not only did I get I loan mod my rental property, I got it before the loan modification currently in progress on my primary residence.

If you truly want to save your home, I strongly urge you to see if you can qualify for the Home Affordable Modification Program. They say the home needs to be your primary residence, but obviously that is not true, at least not any more. Also, only conforming Fannie and Freddie mortgages are covered. The Home Affordable Refinance Program is limited to homes no more than 25% underwater, the loan modification program has no limit to how far you are underwater.

If you are underwater in your home that doesn't mean you are going to automatically get help by way of a loan modification. You still have to be able to afford the payments. You also have to be at least 60 days behind on your payments. If you are not behind on your payments the bank is going to tell you there is no hardship. So, unfortunately your credit is going to take a hit, but it is worth it if you want to save your home. A foreclosure on your credit report is going to be worse than a couple of late payments.

Here are the general qualifications for the loan modification program:

The amount you owe on your loan needs to be less than $729,750.
The rule has always stated that you must live in the property and it needs to be your primary residence. Investment properties were supposedly not allowed. Obviously, this isn't true and I also know others besides myself who have received loan modifications on their investments properties.
You will have to document your income with your two most recent pay stubs and last two years tax returns. You will also need to provide a hardship letter and possibly your last two months of bank statements.
You have to have had taken out your original mortgage before January 1, 2009.
Your loan modification package will contain an affidavit for you to sign stating you have a financial hardship.
The payment on your first mortgage, which includes principal, interest, taxes, insurance, HOA dues, and SID's or LID's if you live in a master planned community, must exceed 31% of your current gross income.
If your total debt including other loans or credit cards total more than 55 percent of your total income, you will need to agree to go to financial counseling.

After all that the lender will determine if you qualify for a loan modification. How it works is the lender will reduce the interest rate on your loan to 2 percent (all backed by financial incentives given to them by the government of course) in an attempt to lower your payments to make them more affordable and allow you to stay in your home. The lender will agree to lower your interest to a point where your debt-to-income ratio does not exceed more than 38%. The government will then pick up the difference to lower your debt-to-income even further to 31 percent.

Your new reduce rate is good for 5 years. Then it will increase 1 percent a year to eventually max out at the current prevailing rate. Remember this not what the rate will be 5 years from now. It is what the rate is when you qualified for the loan mod. So your rate will begin at 2 percent to give you a hand for five years and then it will start adjusting until it reaches the market rate on the day you qualified fort the loan program.

An alternative to a modification is the lender may extend your loan term to a 40 year loan if lowering your interest rate isn't enough to get your debt-to-income down to 31 percent.

Even though the Home Affordable Modification Program expires in 2012 now is the time to apply. If you are struggling to make payments on any of your mortgage payments, I urge you to contact your lender right now. Our motto here is, "All you have to lose is your debt", but if you need a loan modification and you don't even try and apply...all you have to lose is your home.

[This post is written and copyrighted by Financial Elite (http://financialelite.blogspot.com/ ).]

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