Loan Modifications For Borrowers With Two Homes What Are The Options

Loan Modifications are a very emotionally charged issue. If you are a homeowner in trouble and want information on your chances of getting a much needed loan modification it can be a nightmare to get the right information for your specific situation. You have probable heard about the many scam artists ready to take advantage of desperate homeowners that will do pretty much anything to save their home. This is why it is best to get expert advice from one of the many government appointed (FREE) institutions.

However it is a good idea to get a general idea of your situation in order to at least make the right questions.

Let’s present a hypothetical scenario:
You are the owner of a house worth $300,000 on which you owe $400,000 you also have debt racked up on a second home. Can you get a loan modification?
This scenario is rather common. In the past years many saw wisdom in investing in bricks and mortar and buying to rent. When they struggle to find someone interesting in renting they struggle to pay both mortgages, and that’s if they haven’t lost their job.
Unfortunately, even though the scenario is common it is not a good candidate for a loan modification. The reason for this is that homeowners with two homes are too financially committed to qualify. In order to qualify for a loan modification your mortgage payments must not be over 31% of your income. If your mortgage payments are over 31% you are considered a high risk homeowner that should never have spent such a high percentage of their income on a mortgage.

The best options in this case is to try to keep payments and keep your head above water (easier said than done) and down size your mortgage payments as soon as possible in order to qualify for a loan modification.

The question is, if you are in that situation, can you carry on your primary home until the economy decides to come back?

That will depend a lot on how high your interest rates are and what type of interest (ARM or Fixed) you have. The good news is that interest rates are low right now so even the riskier ARM loans are not so bad, at least for now. The issues might come in 2011 when many experts are predicting interest rates are going to climb. For those that are already overburdened this could be what brakes the proverbial camel’s back.

The key is to plan for that very real possibility and downscale now you can plan for it. This might mean short selling your second home and putting your mortgage payments below 31% in order to qualify for a loan modification. However if it is a case of losing both homes or keeping one it is a bit of a no-brainer.

Whatever your circumstances your best option is to get help straight from the experts. The good news is that this information is free as the government is providing it as part of their loan modification program.