Loan Modification Plan For Jobless

Loan Modification Program Options for the Unemployed

Loan modification is a promising solution for struggling homeowners, as long as they have a stable income to earn their lenders' trust. But with unemployment continuing to mount, banks continue to receive applications from people who have lost their jobs and are thus unable to keep their mortgages current. Can unemployed borrowers still qualify for a loan modification plan?

The answer is yes, but not without much difficulty. Even if you're able to stay current and get back on track, it costs money for a lender to put you on a loan modification program. Without a source of income, you'll have to find other ways to convince them that a loan modification makes financial sense to both parties.

Debt-to-income ratio
Lenders assess loan modification applications based on the borrower's debt-to-income ratio, or the ratio of his monthly income to his total debt payments. Generally, the amount that goes into all your debts (including mortgage, credit cards, and car loans) should not exceed 30% of your monthly income. Without an income, however, it's hard for lenders to arrive at a figure. If you are on unemployment insurance or have a passive income such as a pension plan, lenders may be more open to giving you a loan modification plan.

Prospective income
If you're completely out of income, you may want to hold off your application until you have at least a prospective job in sight. This can be something as basic as a job interview, or even a plan for starting a new business. The key is to show them that you are taking positive steps towards getting back on your feet, rather than just waiting for a loan modification program to fall on your lap. You can apply for a loan modification plan up to 30 days before your foreclosure auction date, so don't be afraid to take your time.

Work history
Sometimes, even with neither a passive or prospective income, a lender can consider a borrower eligible for loan modification based on his work history. If you lost your job for reasons beyond your control (such as company downsizing), have a good work history, and held your position for at least two years, you may have a better chance of finding a good loan modification program. Many lenders consider good credentials a form of security for loan modification, as it tells them that the borrower is likely to find employment again in the future.