If you are considering a home loan modification, there is a list of criteria you must meet in order to achieve lender approval. To many applicants, one of the most confusing phrases is “hardship situation.” Clearly, anyone who is seeking a home loan modification is in some kind of hardship situation, so why even ask?
Lenders closely review all of the circumstances provided by the homeowner in order to determine whether their circumstances meet their definition of hardship. Here are conditions that do – and don’t – qualify.
Hardship: The death of a spouse.
The sudden or lingering death of a spouse meets the criteria for hardship, as many families rely upon two incomes in order to meet their financial obligations.
Non-Hardship: Supporting extended family with expenses.
If you have gotten into a financial hole by extending gifts of money to family members, while you do qualify as being generous and compassionate, unfortunately you do not qualify as suffering a hardship.
Hardship: Being laid off.
Going to work and finding the business shuttered was a disturbingly common occurrence during the financial crisis at the end of the previous decade. Losing your job due to a layoff or another unforeseeable reason may meet the criteria for hardship.
Non-Hardship: Voluntary unemployment
If the circumstances of your unemployment render you ineligible for jobless benefits, chances are high you will be ineligible for loan modification, too.
Hardship: Illness or disability.
If you or a family member suffer or have suffered from a serious illness that caused disability, inability to work, and/or unmanageable medical expenses, you may qualify as suffering a hardship.
Non-Hardship: Illness of a pet.
If your pet has suffered an illness that led to extensive care and significant veterinary bills, that will not be considered a credible hardship circumstance on its own. However, if you suffer from a disability for which you use a service animal in order to live independently and that animal falls ill or injured, you may include those events in your hardship letter to illustrate the urgency of your need. Nevertheless, it cannot be the primary reason for your hardship.
Hardship: Divorce or abandonment.
If your marriage dissolves, leaving you in reduced circumstances and unable to maintain your expenses, this may qualify as a hardship.
Non-Hardship: Living beyond your means.
A lavish lifestyle you are not able to afford – credit card debt, boats, vacation homes or other luxuries – are certainly a drain, but are not considered a credible hardship. Unfortunately, neither are student loans and college tuition.
The team at Golden State Financial assists thousands of clients throughout the home loan modification process, successfully reducing interest and other repayment terms and helping avoid foreclosure. For more information about loan modification processes, contact: 949-233-9180
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