Is strategic default wrong? Does doing a strategic default mean that you just simply “walk away” from the home? Is there a right and a wrong way to strategically default on your mortgage?

Kevin Hardin is a local short sale, loan modification and bankruptcy expert in Phoenix and answers just a few of the questions about people have regarding strategic defaults in this short video.

Have more questions about strategic defaults in Arizona? Contact  the local experts on this topic by clicking on the banner below.

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If you really want to know what is going on with getting a loan modification done, who better to talk to than the legal experts who are helping clients with them every day?

Kevin Hardin is the local expert I like to refer people to when it comes to answering questions about getting a loan modification done and what to expect.  In fact, I happen to know that there are at least 7 secrets about loan modifications that most people don’t know about.  Here is just an idea of one thing that I know many people I talk with have no idea about: your lender most likely doesn’t own your loan.

#1: Who really “owns” your loan?

Here is just a little more information about some of the things Hardin covers when talking about loan modifications and what to expect as you attempt to get your lender to modify your loan.

Arizona Loan Modifications: 7 Things To Know

• Who really “owns” your loan? It may not be who you think
• Your permanent loan modification isn’t permanent?
• A forbearance is not the same as a principal reduction
• Once you are underwater in your mortgage, it is virtually impossible to no longer be underwater
• Are loan modification payments current payments?
• Does a loan modification save your home?
• How long before you can become a homeowner again?

Have more questions about what is possible when it comes to loan modification here in Arizona? Be sure to contact Kevin by clicking on the banner below and learn what your options are.

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One common thing people do when in this situation is they speak with a real estate agent about “short selling” their house. And I suspect more often than not, the real estate agent isn’t even aware of all of the potential legal risks associated with a short sale in Arizona.

And yes, there are plenty of potential legal risks whenever you short sell your house in Arizona – not to mention attempting to get a loan modified or if both are unsuccessful, go through foreclosure.

So when people ask us our opinion, we usually tell them to speak with an experienced loan modification / short sale attorney who can give expert legal advice and assistance when it comes to both the homeowner and the Realtor.

Enter Thomson Law in Phoenix.

Phoenix Short Sale Legal Experts

Just a small excerpt about Thomson Law that speaks directly to some of the things they have done to help their clients:

How Do You Define Experience?
Is it simply discussing the close ratio of a short sale? Is it the number of listings? Is it the degree of difficulty? Not really, as everyone deserves professional representation from simple to more complex. The problem with that, is there are many short sales that should never have closed because the sale failed to satisfy the seller’s true objectives or created an increased liability for the seller to his or her lenders…

Thomson Law has maintained the view that the true evaluation of experience is “Did the client receive the guidance that had their best interests in mind”. Thomson Law believes it has done so. Thomson Law attorneys are AV rated, the highest peer rating, from Martindale-Hubbell with more than 20 years of experience in Arizona real estate and mortgage lending. Still many have wanted to know what we have done lately.

To date, no client of Thomson Law has received an adverse decision awarded against them by a court for deficiency liability. But that really does not begin to tell the whole story.

Thomson Law has never really publicized what the Mortgage Mediation practice group has accomplished over the last two and a half years. The firm is very proud of the results of this practice group. The Mortgage Mediation practice group has focused on assisting homeowners and real estate agents with their short sales and or retaining their homes when faced with a point where they can no longer afford the current mortgage. Keep in mind, we are retained in a minority of situations as we provide our services to the real estate industry at large.

Since August of 2008 the accomplishments of the Mortgage Mediation Group are as follows:

• Our staff has fielded over 8,000 incoming phone calls from distressed homeowners.
• We have averaged over 16 consultations a week for a total of 2018 consultations with homeowners that are having difficulty paying their mortgage.
• Of those clients 719 have retained our Mortgage Mediation services beyond the initial consultation.
• The 719 retained clients represent $235,034,092 in total resolved residential mortgage debt. This number does NOT include ANY bankruptcy work.

If you find yourself in a situation where you are possibly facing a short sale, a loan modification or a foreclosure, we highly recommend you speak with the best legal team that you have access to who can help you be sure your legal rights are protected.

A wise man once told me that there is nothing more expensive than cheap legal advice.

And if you don’t believe me, just ask those people who have their lenders chasing them down after a short sale for the deficiency.

Contact Thomson Law:

Kevin Hardin
THOMSON LAW PLC
2701 East Camelback Road, Suite 150
Phoenix, Arizona 85016
602.774.3757
602.840.3290 Fax
KHardin@ThomsonLawPLC.com

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What needs to be true for you to qualify for a refinance loan?

• You need to have been on time with all of your payments in the last 12 months. This means not more than 30 days late.

• You need to have a credit score above 640. If you have credit issues you can try for a loan modification or we can give you some advice on how to improve your credit scores.

• The current value of your home must be greater than 105% of your first mortgage.  If you have an FHA loan currently and your percentage is less than this it might still be possible to refinance. If you have enough equity to cover your first mortgage, but not your first and second combined you may only be able to refinance your first mortgage.

• You need to have sufficient income to support your debts. This debt-to-income requirement doesn’t apply if you have a current FHA mortgage. However, if the combined minimum payments on your current debts/loans is more than half of your family’s pre-tax income refinancing is difficult.

If any of the items above are not currently true for you than you might not be able to refinance.  However even if you can’t refinance into a new loan you can still seek a loan modification so contact us for advice about that.

In a loan modification the lender will work with you to try to make it beneficial to you both. They have the incentive of not wanting your property to foreclose because that would be costly for them. In this case they would work with you to try to reduce your rate or improve the term of your current loan. Unlike refinancing loan modifications are normally free if you work with your lender.

Refinancing involves some fees. What are the fees involved? Bank fees can range anywhere from about $1100 to $5000 depending on the size of the loan and the terms worked out. There are fixed fees that usually amount to about $1100 and then it is common for there to be a loan origination fee of at least 1% of the loan amount. Title and escrow fees are fees charged by the title company and vary from state to state. It is common for these fees to tally $1000-2000. The larger the loan, the larger the title and escrow fees. Another cost are pre-paid items which are pre-payments on property taxes and homeowners insurance. FHA insists that taxes and insurance be included in the escrow account and paid monthly. While these aren’t fees (since you are simply paying ahead on taxes and insurance) they do need to be added to the loan amount or otherwise paid in advance. Finally, there is a 1.75% mortgage insurance premium that Uncle Sam requires in exchange for essentially co-signing on your FHA loan. This mortgage insurance premium (along with the mandatory monthly mortgage insurance fees) helps keep the FHA solvent and able to pay the banks back when FHA borrowers default on their loans. This fee does not apply to conforming loans refinanced under the Homeowner Affordability and Stability Plan.

There are some disadvantages to taking the loan modification route however. The modifications are sometimes temporary in nature. For instance the lender might lower interest rates for just a few years with the understanding the interest rate will revert back after that time. Lenders and loan servicing companies are under no obligation to modify your loan. They often choose to ignore or deny loan modification requests. Borrowers must normally be at least 30 days behind on mortgage payments to obtain a loan modification.

Qualifying for a refinance gives you more control over your situation. When you refinance into a 30-year fixed loan you don’t have to worry about terms changing over the life of the loan.

Contact us to see what the answer is for you in your situation. We can get FHA loans done in as little as Ten Days!

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The most popular answer for this question when I ask people is: “my mortgage balance.”

But that is not all of it and that’s why I wrote this blog.

First, you do have your primary or first mortgage, mortgage principle balance and any past mortgage payments that you have missed. You will also have interest due, and the penalties that your bank is charging if you are behind on your mortgage payments.

Ok, so this covers your first mortgage debt, but there is so much more.

Do you have a second mortgage on the home? A second mortgage can trip you up before you know what’s hit you. That’s because the second mortgage holder must agree to the short sale, and they have historically gotten the short end of the stick when it comes to short sales, foreclosures and bankruptcies. But that’s another topic, so for now, you can count on having to pay your second mortgage company something to let you short sale your home.

At this point you may be thinking, “that’s it isn’t it?” Well, no it’s not, let’s keep looking.

• Do you belong to a homeowner’s association? Are you behind on the dues, or will you be behind by the time the short sale goes through? The HOA fees that are unpaid are considered part of the debt as well.

• What about your property taxes? If you are behind then add that amount as well.

• Um, do you owe the IRS any back taxes? These could be on your home too.

• Do you have mortgage insurance on your home? If so, you may have to pay a little somethin’ somethin’ to your lender’s mortgage insurance provider to let you out of the loan.

Ok, that is all that I can think of off the top of my head for who you have to payoff while doing a short sale.

Oh, wait – don’t forget the costs associated with the sale. Some lenders will require you to pay the sales costs and other won’t. This includes who is paying the real estate agent representing you in the short sale transaction. For any of these costs you may be able to negotiate with the buyer to pick up some or all of the tab, but you will have to be prepared to pay them if they won’t.

Now, I think we’re to the bottom of my list of folks who may have their hand extended for payment in your short sale transaction. For sure it ain’t just what you owe your first mortgage company.

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Part 6 of 6

Finalizing your loan modification

Congratulations! Your loan modification is almost done. Here are just a few tips to wrap up the process.

You’ll receive a loan modification packet from your bank that looks very similar to loan documents. Review them to ensure the following terms are what you agreed to:

• Interest rate
• Interest rate reset cap
• Term of modification (how many years)
• Monthly payment
• Good faith payment due
• New principal balance of your loan

If all of these are in good shape you’ll need to:

• Sign the documents in the presence of a notary
• File a copy for yourself
• Wire good faith payment funds to the bank via the wiring instructions they provide (they will not accept a personal check)

Once that’s all done your loan modification is complete. Congratulations! You made it.

Stay tuned to this blog for more great real estate, mortgage and loan modification advice. Thanks for reading and please share this series with friends and family who may need this help.

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Part 5 of 6

Negotiating new loan terms as part of your loan modification

If you’ve gotten this far, congratulations! It means you’ve been approved as a loan modification candidate and the bank has or will be making you an offer very soon. This post will cover some ways to negotiate with your lender to get the best possible modified terms for your new mortgage.

What to expect from your bank offer

If the bank does approve you for a home loan modification there are a few constants that you must be aware of:

• The bank will not write down the principal balance of your loan, they will adjust your interest rate to lower your payments, but you’ll still owe the same amount on your mortgage.
• The bank will not waive late payments. These will usually be added to your principal and tacked on the back of the loan.
• The bank will require a good faith payment ranging from one to two month’s mortgage payment as a sign of good faith that you’re committed to the mortgage.
• The bank will demand that you have the ability to afford a reasonable market interest rate as part of your modification. (You won’t be negotiating for 1% when the going rate for a 30-year fixed is 6.25%.)

What you can negotiate

• Interest rate. Your interest rate will typically be reduced between 2% and 4%. If you’re interest rate is currently 9% after an ARM adjustment, you can negotiate for a 6% 30-year loan fixed for 5-years no problem. You will have problems negotiating for a 3%. It’s not going to happen.
• Post-modification adjustment cap. After a fixed period (typically 5 years) your modification will expire and your rate will become adjustable again. You can negotiate the cap of your adjustment. Say if you agree to a 6% loan you can negotiate a cap at 8% or something similar to protect you from a similar reset disaster in the future.
• Good faith payment. Every bank will require a good faith payment of some sort to get caught up with delinquent payments before they go through with a loan modification. This is typically one to two months of mortgage payments. If you’re in a bind this may not be feasible. You can often negotiate this down to half a mortgage payment. Either way you’ll need to make some sort of payment – be prepared for that.

Take yourself out of the equation emotionally

Your home is an emotional asset. Your family lives there, it holds your memories, etc. Do not let you emotions get in the way of negotiating. Use these tips to be a better negotiator with the bank:

• Have a game plan. Have a hoped-for mortgage payment and interest rate so that you know what you’re negotiating for. Stick to your guns and be firm on the terms so you can get the best deal possible.
• Keep a calm demeanor and realize you’re working with another human who can either help you or make your life hell. Work to make them want to help you more.
• Be polite, yet assertive. If you don’t agree with something speak up and voice your objection. Be polite, but know what you want and stick to your guns.
• Appeal to people’s sense of fairness. Use terms like “doesn’t that seem fair?” or “isn’t that reasonable?” People have a hard time objecting to something that seems fair or reasonable.
• Get something if you’re asked to give something. Quid pro quo is fine here. If you’re asked to give something up (like a slightly higher monthly payment) then ask for something in return – a lower good faith payment, for example.
• Document everything. Don’t get stuck in a game of he said, she said. Write down offers so that you have a record of what’s on the table at any given time.
• Elevate to a decision-maker. Feel free to ask to speak to a manager or supervisor if you’re dissatisfied with your progress.

Negotiate to a point where you’re in the target range of your hoped for mortgage payment and interest rate and good faith payment. Once you’re there take the offer. No need to get greedy when your home is on the line. Next we’ll talk about wrapping up your loan modification.

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Part 4 of 6

Tips for qualifying for a loan modification

So far we’ve discussed the basics as it relates to getting a loan modification. Now we’ll talk about a few tips that will help you qualify for a loan modification. These tips are centered around your hardship letter and the monthly expense worksheet.

The hardship letter

Called an LOE in the biz (letter of explanation) this letter is your explanation of why you believe you qualify for a home loan modification. Remember these facts when writing your hardship letter:

Banks want to work with people that:

• Are credit-worthy and have a good payment history
• Have been in their home for a long time
• That have been impacted by an unusual adverse event
• Have good potential to keep earning their current level of income
• Have good potential to pay back the mortgage
• Are likely not to go in to default after modification

Banks don’t want to work with people that:

• Have been chronically late in making mortgage payments
• Have lived in their home less than a year
• Are a poor credit risk
• Have lost their primary source of income
• Are likely to go in to default after modification

You want to write your hardship letter with these facts in mind. A good hardship letter includes:

• An explanation of the event that caused you to fall behind on your mortgage (or if you’re current why you’re requesting a modification). This should be positioned honestly as a one-time setback that is in the past.
• These can range from your adjustable rate mortgage resetting, to an illness now recovered, to a job loss that has been replaced by a new, stable and similar paying position. These are all one-time events that don’t impact your ability to pay a reduced amount moving forward.
• A statement of your desire to stay in the home and make paying the mortgage a priority.
• A statement of why your situation was temporary and one-time.
• A statement of why your situation is improving.

If you’d like a free hardship letter simply subscribe to Blown Mortgage’s Loan Modification Tips email list.

Be brief and to the point. We don’t need a novel, just a straightforward and accurate letter that states your willingness to stay in the home and the freak nature of the event that caused you to request a loan modification.

Monthly expense worksheet

Because your DTI is such a critical part of calculating whether you qualify or not, we want to be as high-level in our detail reporting to the bank. This means that we want to focus on big ticket items that we know will be consistent month-to-month and not the variable expenses that we can control through sacrifice and restraint.

Recommendations for your expense worksheet:

• Submit your own first. Let the lender ask for more detail. Your expense worksheet should include all items on your credit report and nothing else. Car, home, credit cards, student loans or second mortgages are the big ones.
• Variable expenses should be left off initially since it is impossible to predict the future and how your spending will change – it all comes down to the modification before you can accurately calculate that expense.
• If you are close to 50% call your credit card companies and ask for a reduction in your monthly payments. Even if you can save $40 per month on each card you could benefit with a lower DTI.
• Can you live without HBO? If you’re on the border look for ways to shave dollars off monthly expenses. While these won’t be in round one of our expense report it’s important to keep these in our back pocket for possible reductions.
• Double-check your expenses. Are you self-employed and pay for your car from your business? That doesn’t go on your expenses as it’s a business expense.

By preparing your own financial worksheet first you can save the time of filling out the lender’s which is often more detailed and time consuming and present your application quickly to the lender. If the processor accepts your application as is you’ve gained valuable time. If they request one of their own then you’ll have the information already collected. However; by preparing a detailed and accurate monthly expense worksheet that focuses on the items on your credit report and grouped in high-level buckets you’ll make it easy for the bank to see your financial snapshot and determine whether you’re a good candidate for modification.

With all the demand for modifications, making the bank’s life easy goes a long way. Remember these are just people swamped with work and in a demanding job where they have to say “no” a lot. Give them a reason to enjoy working on your file by being organized, efficient and together and you’ll get better treatment than someone who is difficult, disorganized and non-responsive. In the next post we’ll discuss negotiating your modification terms.

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Part 3 of 6

Determining if you qualify for a loan modification

So far in this series we’ve talked about the process of loan modifications, how to get started and how to collect the information you need to accurately complete your monthly expense worksheet. The monthly expense worksheet is going to be used by your lender to determine if you qualify for a loan modification or not. Therefore this is an extremely important step that must be taken with care. Once you submit your monthly expense worksheet it becomes part of your file and is very hard to change it once submitted. Take your time and make sure it is correct!

Tip: Never lie on your monthly expense worksheet. Loan fraud is a federal crime. Knowingly submitting false information will jeopardize your modification application and may subject you to legal action from your lender.

Understanding debt to income ratio (DTI)

Debt-to-income (DTI) is the key determinant in most lending situations. In a traditional home loan the DTI plus the loan to value (LTV) play roles; but in a modification it is assumed that the LTV is negative (you are upside down on your home and unable to refinance) so the key decision factor is DTI (along with your credit worthiness as demonstrated by your monthly payment history and credit report).

DTI is calculated as follows:

Total Monthly Expenses / Total Gross Income

For example if your gross monthly income is $5,000 per month (you make $60,000 per year) and your monthly expenses are $3,000 then your DTI is:

$3,000 / $5,000 = 60%

Understanding gross monthly income

Before we can accurately calculate your DTI we need to accurately calculate your gross monthly income. Gross means the dollar amount you earn before deductions such as state and federal taxes, health insurance, 401(k) and FSA contributions.

If you are a salaried employee this is relatively easy to determine. Take your yearly salary and divide by 12. This number is your gross monthly income. If you make $60,000 per year, your gross monthly income is $5,000.

Tip: Many salaried people are paid every two weeks, not twice a month. Being paid every two weeks means you receive 26 paychecks instead of 24 (bi-monthly checks). If you take your last two paychecks and add them up before deductions you have short-changed yourself in calculating your DTI. Double-check with your employer to see if you get 26 or 24 paychecks in a year, or better, use the method described above to get your gross monthly income.

If you are paid by the hour this becomes a bit more difficult. First, you cannot count overtime pay towards your gross monthly income. Even if you’re a California-state prison guard who has been working overtime for 5 years in a row, you still have to use your base hourly income to qualify.

Take the last two-months paychecks (4) and add up the hours (except for overtime). Divide by 2. That is your average monthly hours worked. Take that hour amount and multiply it by your hourly wage. If you worked an average of 160 hours per month (40 per week) and make $20 per hour you make $3,200 per month gross income.

Tip: Including overtime is one of the biggest reasons loan modifications get rejected for hourly workers. Don’t include it in your monthly calculation. The bank won’t count it and calculating your DTI including overtime will throw off your calculation.

If you receive social security or long-term disability you may be able to “gross up” you benefits. Because social security is not taxed banks often add 25% to the value of your monthly benefit to more accurately represent the value of this money. Be sure to ask your bank if they “gross up” social security before doing the calculation with “grossed up” social security.

How to “gross up” social security:

$1,000 monthly social security benefit x 1.25 = $1,250 grossed up benefit for DTI calculation

Tip: Most banks gross up these benefits, but we always recommend asking your representative in the loss mitigation department if they gross up social security in their underwriting to ensure that you’re making an accurate calculation.

Target debt to income ratio

The target debt to income ratio that you’re looking to achieve is 50%. That means that your total monthly expenses including your mortgage comprise only half of your gross monthly income. If you make $5,000 per month ($60k/annually) your monthly expenses can’t be more than $2,500.

In reality, if you’re considering a loan modification, it is likely that your monthly debt to income ratio is closer to 100% or worse. The modification is going to help that, and we have to figure out what that will do to the ratio first.

Calculating a reduced mortgage payment

This step gives you an idea of what you’ll negotiate for when you submit your package to the bank. Use an online mortgage calculator (there’s a good one at bankrate.com: http://www.bankrate.com/brm/mortgage-calculator.asp but anyone will do) to play around with different loan modification scenarios.

Tip: Banks will typically not reduce your principal owed, and rather adjust the interest rate to reduce your payments. They will typically reduce them between 2-4%. If you qualify for the new Making Home Affordable federal modification program you may be eligible for an even greater reduction. We will talk more about that program in future posts.

Example mortgage calculation

Say you have a $165,000 mortgage that recently adjusted from 5.25% to 9.25%. Your situation would look like this:

Loan amount: $165,000

Term: 30-years

Interest rate: 5.25%

Monthly payment: $911.14

After adjustment

Loan amount: $165,000

Term: 30-years

Interest rate: 9.25%

Monthly payment: $1357.41

Lets say that you’re still making that $60,000 per year and that you had total monthly expenses (not counting your mortgage) of $1,800 per month.

Your DTI prior to adjustment:

$1,800 + $911.14 = $2,711.14 / $5,000 = 54.23%

Your DTI after adjustment:

$1,800 + $1,357.41 = $3,157.41 / $5,000 = 63.15%

Now the target DTI is 50%. Some banks vary and it’s very hard to get them to tell you exactly what they’ll accept; but industry standard is 50%. They’ll sometimes accept higher; but if you’re not near the 50% mark you’ll often not qualify for a modification.

So what can we do to get down to a 50% DTI in the above example?

Well we can request a modification of our mortgage back to the original 5.25%?

That would give us a monthly mortgage payment of $911.14 and a debt to income ratio of 54.23%. That’s not quite at 50% and ideally we want to be under 50%. So what else can we do?

We can:

• Double check our expenses for items that shouldn’t be included (such as work-related expenses)
• Call our credit card companies and ask for a reduction in monthly payments
• Reduce our utility bills by cancelling premium cable subscriptions, opting in to programs that reduce utility bills in exchange for power-flexibility in the summer, switching to a smaller trash can size, etc.
• Exclude expenses like eating out, food, clothes and discretionary expenses from your DTI

Because your monthly expenses can fluctuate quite a bit each month you want to focus on big ticket items and not rack up lots of little dings.

What if we:

• Saved $300/month by not eating out
• Canceled a gym membership worth $100/month
• Reduced our utilities by $50/month

That would give us a DTI of: 45.22% – bingo. That’s the number we want to work with.

So when we complete our monthly expense worksheet we’re going to report the big ticket items that are always there, but we’re going to leave off for now the variable items that we can control, such as food, etc.

If they ask for it later we’ll give it to them; but for now we want to present a case that with a new “hoped for” mortgage amount (the modified rate and monthly payment) plus our monthly expenses that we’re a good candidate for a mortgage at under 50%.

Tip: Never lie to your bank. What we’re doing here is making an assumption that we can control variable monthly expenses through good judgment and sacrifice in order to keep our home. If we must present this information we will.

In the next article we’ll talk about tips for qualifying for a loan modification.

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Part 2 of 6

Loan Modifications – Doing your homework

Once you’ve received your loan modification application from your lender it’s time to do your home work. What do we mean by “your homework?” We mean simply the collecting and ascertaining of your income and expenses in order to successfully complete your loan modification application.

In brief – think back to the documentation you needed to apply for your loan, you’ll need essentially that information in order to complete your loan modification application.

A typical loan modification financial worksheet will request the following information:

• Contact Information
• Property information including estimated value
• Current monthly income
• Additional income (not wages) such as social security, child support, welfare, etc.
• Estimated value of all assets
• Home
• Other real estate
• Checking accounts
• Savings
• IRAs
• 401(k) accounts
• Stocks, Bonds, CDs
• Auto 1, Auto 2, Boats, RVs, etc.
• Other investments
• Liabilities (monthly payments and balance owed)
• Alimony – Child support
• Dependent care / child care / tuition
• Cable /cell phone
• Other mortgage(s) / rent
• Personal loan(s) / credit cards
• Medical expenses
• HOA fees / taxes / insurance
• Automobiles
• Tax liens
• Utilities
• Auto expense (gas / maintenance)

Collect the following:

• Two most-recent months paystubs for you and your spouse (if you both work)
• Three months bank statements for your primary checking and savings accounts
• Last year’s W2 or 1099s
• Most recent statement for any other types of income – social security, disability, etc.
• Most recent mortgage statement
• Most recent home equity line statement or 2^nd mortgage as appropriate
• Most recent credit card statements
• Most recent student loan statements
• Most recent car loan statement(s)
• Most recent home owners’ association statement as applicable
• Most recent statement for other debts as applicable

Keep all of this information in your notebook or a separate folder. You’ll be using this information a lot so keep it handy.

Now, we need to get a sense of your monthly expenses that aren’t a part of the above debts. Using either your past banks statements or your best accounting, estimate the following monthly expenses:

• Food costs (dining in and eating out)
• Clothing costs (per person)
• Utilities cost (including phone, cable, electricity, water, gas, trash and cell phones)
• Daycare or private school costs
• Assisted living costs
• Health insurance costs not automatically deducted out of your paycheck
• Gym memberships or other membership charges

Once you’ve collected all of that information it’s time to complete your monthly expense worksheet. This monthly expense worksheet is going to determine your debt-to-income ratio. This is the single most important item in determining your eligibility in getting a loan modification.

Tip: It’s never recommended to try to calculate this information while on the phone with a bank representative. It is too important to do off the top of your head. Set aside some time to sit down with some quiet time with you and your spouse and go through the numbers carefully.

In the next post in the series we’ll go in to qualifying for a loan modification. For now, if you’d like a sample monthly expense worksheet you can download one for free by joining Blown Mortgage’s Loan Modification Tips mailing list.

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