So you’re in default on your mortgage. You’ve several months behind on your payments. You’ve tried and failed to get a loan modification and work out a repayment schedule, and foreclosure is looming. Should you consider declaring bankruptcy?

In terms of avoiding foreclosure, declaring bankruptcy might be considered the nuclear option. It has the power to wipe out many of a borrower’s debts while holding other creditors at bay. It can enable a borrower to hold onto important assets such as a home or car, while working out a repayment schedule to get caught up on payments for them.

But a bankruptcy is generally considered a last-ditch option for dealing with overwhelming debt. For one thing, you may have to give up many of your current assets, such as savings and certain investments, in the process. A bankruptcy also has a long-term impact on your credit rating, remaining on your credit report for 10 years – a foreclosure, on the other hand, only remains on your record for seven. However, there are circumstances when it might make sense to declare bankruptcy in order to hold on to a home in which you’re emotionally and financially invested.

First of all, you’re going to want to talk to an attorney if you’re seriously considering filing for bankruptcy. A certified nonprofit debt or housing counselor (who you should have already been working with in your efforts to obtain a loan modification) can help you work out some of your options beforehand and help you determine if bankruptcy is something you want to explore, but you’ll need an attorney to explain all the considerations involved in your personal situation and help you decide if you wish to proceed.

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Home mortgage modification deserves your serious attention.  There are already millions of homeowners who enjoyed its benefits.  You can also get the benefits of mortgage modification by knowing the right things to do.  

The Need for Mortgage Modification

There are several reasons why you need to modify your mortgage loan.  Your decision will primarily depend on your current financial situation.  For example, a job loss, increasing medical bills or a death in the family could have a significant effect on your capacity to pay your current mortagage and other debts.  The increasing disparity of income and cost of living is also a big reason why you may experience financial trouble.  

Unfortunately, most homeowners are afraid of calling their mortgage lenders thinking that they will get outright rejection if they apply for loan modification.  This is not true today because financing companies and banks are trying to reestablish trust in their customers.  Due to the bad economy, these companies are offering favorable arrangements so they can continue their business.

What to Do Before You Apply for Mortgage Modification

Before you attempt to contact your mortgage lender for a loan modification, there are several things that you need to prepare.  First, make sure that you have checked all your options.  There is a need for you to prepare a summary of your current financial position.  You may need to prepare duplicates of your documents in case you have a mortgage with two companies.  

Be thorough when you prepare your current financial standing.  You may need to include repetitive expenses like medications and recurring medical bills.  New expenses for required purchases can also be included.  By tracking your expenses, you will be able to establish an accurate picture of your cost of living.  It is generally suggested to go back at least three months in order to fully establish an accurate accounting of your cost of living finances.  

Who Can Help You When Applying For Loan Modification

You can seek the assistance of non-profit groups and organization that specialize in helping homeowners who want to apply for loan modification and refinancing.  These groups can help prepare your financial position in the proper format.  Most of these groups have already worked with different mortgage companies.  That is why you will be able to get good insights from them concerning the processes and procedures of home mortgage modification.  

Of course, your mortgage company can also offer valuable help for you.  Usually, these companies have special departments that deal exclusively with mortgage loan modification.  By speaking directly with the authorized service personnel of your mortgage company, you will know if your documentations are correct.  They will also give you the necessary forms to complete and other documents that you need to prepare.  Once you have prepared everything, you can now submit your paper works to formalize your application for a mortgage loan modification.  

Mortgage modification is a real life saver.  Modifying your mortgage could result to lower rates and low monthly payments.  So it is a good option that you really need to consider.

Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Massachusetts Mortgage Brokers and Lenders and provides reviews of national companies like Aegis Mortgage.

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You can have acceptable credit for a home loan after bankruptcy in as little as two years after you finish settling your debts. Two years is really the soonest you can make this happen, lenders have a general industry rule not to approve your application before then, but this time frame actually works well for applicants. After two years you will have a much better credit score and acceptable-sometimes even good-credit.

Lenders want to see that during those two years you have worked on building up credit and haven’t gotten into financial problems again. They want to see that you were able to handle making payments on time every month on both types of payments: revolving (like credit cards) and installment (like loans).

Another thing they want to see is signs of stability, for instance, they want to see that you have a well paying job that you have had for a good length of time and have lived in the same area for a decent length of time.

And, one of the more important things to show you are serious, lenders will want to see that you have saved a down payment for your mortgage. Twenty percent is a good goal to aim for, as this makes it so you won’t have to pay PMI (private mortgage insurance) which will save you money, and shows that you are serious about looking for a loan. If you don’t have twenty percent that doesn’t automatically count you out, but you will hopefully stand out more in other areas.

Having acceptable credit for a home loan after bankruptcy doesn’t have to be a battle, take your time and get your finances in order and you’ll have a place to call home in less time than you think.

For more about building credit for a bankruptcy mortgage loan, making your application stand out, and all of your other questions check out Bankruptcy Mortgage.
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