Loan Modification Forms - Ensuring Your Income to Debt Ratio Gets Approval

Determining your debt ratio is a key factor to your loan modification approval. Simply put, your debt ratio compares your income to your expenses. If that ratio is too high, your chances for approval by your lender diminish. Each lender must abide by strict approval guidelines and you can be sure they will look at this ratio very closely. The good news is that you can calculate your own debt ratio in just a few easy steps.

Each lender determines a ratio that they deem an acceptable level, and this can vary from lender to lender. Generally speaking, it's a good idea to keep your ratio under 40%. In other words, your homeowner expenses should not exceed 40% of your gross monthly income. Be sure to include insurance and taxes in your expense calculations. The goal of Obama's new loan modification plan is to allow lower payments and lower the ratio to 31%.

Once you have your debt ratio calculated, you can determine your new monthly payment and ascertain what you'll need to do to arrive at that figure. Here's an example: you may arrive at an acceptable ratio by lowering your interest rate to 4.5% and extending your amortization to 35 years. By reflecting those figures on your loan modification forms, your chances for approval will increase. Just make sure that you find your target payment and it is within your budget. You should also make sure that you follow your lenders guidelines. It is not a difficult process, as long you follow it step-by-step.

Your lender will be checking your loan modification forms to determine whether or not you can meet the debt ratio guidelines. You can do this by completing your forms, itemizing your expenses and demonstrating that you have a new target payment that meets the lender's requirements. It's important to have all your income and expenses clearly made out. Don't give your lender a reason to question your numbers and your application will get approved much quicker. If you can complete this critical but simple step, you will have an edge over other applicants.

How to Apply