Qualifications and benefits of Obama’s loan modification program

In order to rescue the housing market, President Barack Obama of the United States introduced the loan modification plan. This loan modification plan helps distressed borrowers to keep their home even if they cannot pay off their mortgage payments. Obama introduced the loan modification program known as Federal Home Affordable Modification Program (HAMP). This article provides you with information you must know in order to be eligible for Obama’s loan modification program and the benefits you may receive from it.

Home Affordable Modification

This type of loan modification program helps you modify your home mortgage without refinancing. This program helps those homeowners who may have suffered some kind of financial hardship like loss of job, death of spouse or those who have lost their household income.

Eligibility criteria for HAMP

The federal government has laid down certain eligibility criteria which you have to fulfill in order to qualify for HAMP.

  1. Live in your home - In order to qualify for the loan modification program you must be living in your own home when you apply.
  2. Must have income – You need to have some present income in order to be eligible for Obama’s loan Modification program and you must also be able to prove your income.
  3. Loan limits – You must have loan within the limits ($625,500 in high cost areas and for other areas it is $417,000).
  4. House payments must be more – Your house payments must be at least 31% more than your gross income.
  5. Obtained mortgage before January 1, 2009 – HAMP is applicable for only those who have obtained mortgage before January 1, 2009.

Benefits of loan modification

Here are some of the benefits you may find when you apply for HAMP.

  • Helps you to extend your loan term almost up to 40 years.
  • Helps to reduce your interest rate by 2% to 4.5%.
  • Principal amount may also get reduced.
  • If you stay current on your mortgage payments, federal government may pay you $5000.

Obama’s loan modification program is not mandatory for lenders. However, most of the lenders have agreed to participate in this program.  In order to apply for HAMP, you have to contact your mortgage lender first but before you begin to talk to your lender, you must keep your entire documentation ready in order to get loan modification approval quickly.