Lets assume that you have a large mortgage payment and you are working on a loan modification. However, your modification is not yet complete, nor is it a guarantee. What should you do. We can look at this based on the things involved in completing your loan modification.
Typically when a loan modification is going through the approval process it can seem to take a long time for the home owner, especially if they are already behind on their house payments to begin with. There is an extensive approval process that has to be achieved in order for the modification to go through successfully. The property's value has to be assessed, the lender or investor has to be o.k with taking less of a return on their investment in order to try to prevent foreclosure, attorneys have to draw up a new contract to be signed and notarized, court papers have to completed, among other procedures. Yet, when a home owner thinks of trying to lower their house payment, they think it simply just their lender adjusting the interest rate in order for them to get a lower house payment. It's really not that simple, as you can see from above.
One of the biggest thing to know is that while a modification is going through the approval process which takes about 2-4 months, a homeowner should always continue to try to make their regular house payment to prevent negative reporting on their credit report. Unless of course, there isn't an option but to make the payment late. If you are trying to preserve your credit you should always make your payments on time while you are watching the modification being processed for the approval. Even if your get your paper work saying that your modification should be or will be completed by such a date, keep checking back with your mortgage company to make sure that your modification is completed, and that way you will be showing current with the credit bureaus. Then if the rate is lowered you can begin paying the new lower house payment. Similarly with a refinance, the payment to complete your mortgage pay off should with your mortgage company and reflecting on your account before you stop making your payments, or else it could hurt your credit.
Companies have to report true and accurate payment information by law to the reporting agencies. So removing any negative credit reporting can seem to be very difficult to achieve at times.
Another reason why it is not a bad idea to continue paying your regular payment is because even if you made your payment, and you were not aware of the completion of the loan modification; you will still be credited for all payments made on your account. One of two things will happen if you made your regular payment and the payment went down without you know that it went down. You will either get a credit for the next month or months due, or the overage of the payment will go to lower your principal balance on the mortgage. Even if the amount that you paid above the payment went towards the next payment and you wanted it applied to the principal balance, then it can be reversed. So either way you will come out ahead. You will get credited for all of your payments. To take this another step, if you can now afford to make a higher payment assuming you received a loan modification, you might now consider making a higher than normal house payment in order to accelerate your mortgage payments, and end up paying off your mortgage in up to 1/2 the time of the life of your loan.
Another thing to consider, if you are trying to get your own modification done on your own; ask for things that are important to you. Even if you don't know the loan "modification talk," you can still ask. For example, ask your lender to lower your principal balance 15% in addition to lowering your interest rate for a lower monthly payment. If you don't get a lower principal balance but you get a lower interest rate, at least you asked and the answer could have been a yes or a compromise on the part of your lender. Remember it about negotiating a great deal for you and your family for the future. Don't be afraid to ask even if you know little or nothing about getting a great loan modification, you never know what the outcome might be.
