The Risks of a DIY Loan Modification

If you are in trouble with your mortgage, a loan modification could be the answer that you are looking for. A loan modification can help you get back on your feet and get some terms that you can live with. While a loan modification can be a great tool, a DIY loan modification could be trouble. Doing this process yourself can result in a few risks. Therefore, you should be aware of these risks before you go it alone. Here are a few risks that come with a DIY loan modification.

Missing Deadlines

The loan modification process is not an easy one and it contains a lot of legal terminology. With such a detailed process, there are deadlines that have to be met. If you do not follow the guidelines and miss a deadline, there could be grave repercussions. For example, they could go ahead and foreclose on your house if you do not meet the deadlines that they give you. A loan modification expert would be able to stay on top of all of this for you and help you to avoid problems. However, when you do it yourself, you put all of the risk squarely on your shoulders.

Agreeing to Negative Terms

When you go into a loan modification with the bank, you are essentially negotiating with them. They already have you in a mortgage agreement and could easily foreclose on you if they wish. However, most of the time they are willing to work with you because they do not want to own your house. Keeping you in your house is the best scenario for both parties. 

When you are negotiating with the bank, they will often throw out some terms that are not actually in your best interest. It might appear like a pretty fair deal, however, when it is closely examined, the terms are much better for the bank than they are you. For example, they might offer you a balloon loan with a very low monthly payment. You see the payment and jump at the opportunity. However, at the end of the mortgage, you find out that you still owe the entire amount of the loan. You have to come up with the money immediately or lose your house then. In the meantime, the bank was fine collecting your interest payment for years. 

While this is only one example, you need to be aware of what the bank is offering you. They will do whatever they can to stay in control of the situation and benefit somehow. Therefore, you need to do everything that you can in order to understand the terms that they are offering. Agreeing to the wrong terms could eventually make you worse off than you were before. 

Once you get to the point of needing a loan modification, you might not have many options. However, you need to still be patient and take the best terms that you are offered. Otherwise, you might learn to regret it.