Did you know that you could be turned down for loan modification help because you have too much money in the bank?  Many homeowners think that the more money in the bank they have, the better-their lender will feel better about giving them a loan mod.  But the truth is far from it-in fact if you have too much money sitting around you could be denied a loan workout!

How much is too much and what type of accounts could be counted against you?  While each lender and investor may have slightly different guidelines, the basic criteria is simple-generally you are allowed to have 3 months of housing reserves in a liquid account.  Housing consists of your monthly mortgage payment, monthly property taxes, homeowners insurance and any HOA dues.  So, for example if your total monthly housing costs were $4000, you could have $12,000 in liquid reserves.  However, some programs cap it at $5000 total, regardless of your monthly housing expenses.

What is a liquid account?  Basically, every type of account EXCEPT retirement funds-those are protected and will not be counted.  Here is what will be reviewed:

  1. Checking & Savings
  2. CD’s
  3. Money Markets, Mutual Funds, Stocks & Bonds

But remember, if they are held in a 401k, IRA, SEP or other retirement vehicle, then they will not be counted.  It’s a bad idea to drain your retirement accounts in order to pay your monthly mortgage!

Why does the bank care about how much money you have in the bank?  Basically, they want to see that you have exhausted all of your options, are at the end of your rope and a loan modification is the only hope for keeping your home.  If you still have substantial amounts of money in the bank, they will probably say “pay us-you have the money!” and you will have to wait to get help until you are almost out of funds.

This calculation is called your Asset Ratio and is one of several very important qualifying triggers that you need to know when you apply for a loan modification.  Your debt ratio, new target payment and other critical factors are all figured automatically when you use a loan modification software program designed specifically to help borrowers apply and qualify for a loan workout.  Easy to use, this calculator  has helped thousands of borrowers complete their application accurately and more importantly, showed them just where some adjustments may need to be made in order to qualify.  Remember, unless you can prove in black and white that you fit into the approval guidelines, your chances are slim-make certain you do it right the first time.

Susan Gregory is the author of two resource books for homeowners and real estate professionals, the best selling The Complete Loan Modification Guide Kit and The Stimulus Book-HAMP & HAFA Edition.  She also teaches workshop training classes for the federal programs to help real estate professionals assist homeowners with home retention and exit strategies.

Prepare your application correctly!

The Complete Loan Modification Guide kit provides a valuable resource for borrowers that includes a step by step handbook, required forms, and a loan modification software program that mimics the federal approval triggers for loan modification.  An advocate for homeowners, Susan also offers free 30 day email support for all of her clients who purchase her publications.  Thousands of homeowners have been helped using these materials.  Visit http://www.myloanmodficationcenter.com for more information.

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