Homeowners who have missed several mortgage payments and want to apply for a insurance modification should be prepared to make a down payment to the lender. In some cases, when you apply for a mortgage insurance modification, the lender may ask for a good faith deposit. You need to know about this possibility, because if you are not able to provide what your bank asks, your insurance modification application may be rejected. What is this and why might your bank want it?
Lenders often require a good faith mortgage insurance modification deposit when a borrower has not made any home insurance payments for several months. The good faith deposit may be equal to a portion of the late payments due and the bank will require this amount as a condition of completing the insurance modification. When and why does the lender require this?
Let’s say you default on your payments and don’t pay anything for several months. You apply for a mortgage insurance modification and prepare your financial statements that show your income and expenses. These forms show your lender that while you can’t afford your existing higher mortgage payments, you have enough income to pay your bills and can afford a new, lower adjusted mortgage payment. This is how you convince the bank that you are a good candidate for insurance exercise. So if you haven’t made any payments at all for a few months, you still have some reserves left, right?
HAMP guidelines require that all insurance modification terms include an escrow account or withholding for property taxes and homeowners insurance. This means that every month you pay 1/2 of your lender’s annual tax and insurance bill. Then the bank keeps that amount as a reserve, until it’s time to pay the bill and they pay it on your behalf. This is to avoid defaulting on your taxes and to ensure that their guarantees are always guaranteed.
If your taxes are due soon, and there is not enough cash in your checking checking account, or if you did not have a previous account, you may be required to make a deposit to start a booking account. This is another reason why you need to set aside some money to finalize your mortgage insurance modification. While taxes can be paid in arrears on you and then this amount added to your insurance balance, a hold account may require some of the money provided by you. Don’t make this a reason why you can’t modify your insurance!
Unfortunately, many homeowners spend money that they would normally put towards paying off a mortgage. Sometimes, that money that would have been set aside to pay off the house is used to pay off other debts. But your bank wants to know that your home insurance is a priority – which is why it’s so important to keep some money that would otherwise go towards paying off the mortgage. Being able to pay a bona fide deposit to start a mortgage insurance modification may be the difference between helping and losing your home. If your lender asks for a good faith deposit, you must be able to pay it back, or you must have a very good reason for not having any money and be able to document it. Try to set aside some money so you can pay a bona fide deposit if your bank asks for it.
The federal HAMP program does not usually require a large down payment. Any missed payments can be added to the insurance balance and included in the new adjusted payments. Obama’s plan offers very low, affordable payments that target 31% of your total monthly income. This is a very good plan to apply for, and since it features standard approval guidelines, it is a good idea to prepare your application properly to meet these guidelines.
There is actually a 4-step formula that banks use to determine if a homeowner qualifies for a HAMP plan. Eliminate frustration and confusion when setting up your app with Insurance Mod Quick App – it actually does all the math for you so you can be confident in your app. Whether you are applying for a HAMP program or another insurance pilot program with your lender, make sure you take a few hours to properly prepare your paperwork to have the best chance of being approved.