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What's It Take to Get Modified?

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Posted On: 09/01/2010

Question: If we apply for a loan modification what financial information will be required?

Answer: Verbal interviews have been widely used to get financial information, however, that's changing. For instance, Fannie Mae has issued new guidelines that require the written verification of income, liabilities and monthly expenses for all borrowers seeking permanent Fannie Mae mortgage modifications. If the usual pattern plays out, other loan owners will adopt the same policy.

If you want a mortgage modification, the new Fannie Mae standard is not a big deal. It means digging up some additional paperwork, but the benefit can be the difference between homeownership and foreclosure.

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Question: Can a lender give me a mortgage "worksheet" instead of a Good Faith Estimate?

Answer: A "worksheet" can be used to provide a general idea of loan and closing costs, however, it is not binding on the lender in the same sense as a Good Faith Estimate. For this reason the worksheet should not look like a GFE, it cannot be used in place of a GFE and no borrower should believe that it is a GFE.

Question: If I've once owned a home, can I qualify for a first-time buyer program in my state?

Answer: The definition of a "first-time" buyer for many state programs says a "first-time" purchaser is an individual or their spouse who has not owned or co-owned real estate for a period of three years either in the state or in another jurisdiction. This means if a spouse has owned property during the past three years you likely will not qualify for a first-time buyer program.

Why the three-year standard? It's designed to allow people to recover from such events as a divorce, bankruptcy or the death of a spouse. One way authorities check is by looking at past tax returns to see if there has been a mortgage interest or property tax deduction.

For specifics in your jurisdiction, speak with state and local housing authorities.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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