The Wells Fargo loan modification approval formula uses the borrowers gross monthly income, the current mortgage payment and loan balance and something called the Waterfall Method. Here are some details that will explain how this approval formula works and why it is critical that your loan mod application shows just the right amount of monthly income, expenses and assets.
- It’s all about the MATH-no matter how deserving you are,unless your financial worksheet figures are acceptable and pass the formula, you will NOT be approved for a new lower mortgage payment! Don’t think that the bank is on your side and wants to help you-they will only help you if you prove to them in black and white that your financial situation fits into the strict guidelines for acceptance.
- Most Important! The household monthly gross income is a critical part of this formula-the amount of total gross monthly household income you report will be used to determine your debt ratio, your new target modified payment
and also if you pass the Waterfall. If you report too much or too little income, you will fail. Homeowners can use the Loan Mod Calculator to automatically compute and display exactly HOW MUCH income will be required to PASS.
- The debt ratio calculation uses your total gross monthly income and your current mortgage expenses-monthly mortgage payment, monthly property taxes, monthly homeowners insurance and any HOA dues. The standard approval formula requires that more than 31% of your income be used for household expenses. However, a new plan called Tier 2 is a bit more flexible on the debt ratio formula and allows a range between 25% and 42%. The Loan Mod Calculator will compute your debt ratio and show you a PASS or FAIL for this category instantly.
- Cash flow is part of the Wells Fargo approval formula and tells the bank if you are truly in a financial hardship. Ideally, after paying all of your monthly bills you should be barely making it or even in a negative cash flow-BUT after the loan mod you need to show that you will have at least $250 left over each month. Use the Loan Mod Calculator to fine tune your expenses so that your results show you a PASS for these two important categories.
- What is the WATERFALL? This is the test that you must PASS-it shows Wells Fargo that your mortgage can be modified using standard terms to arrive at your new modified, affordable mortgage payment. Your Loan Mod Calculator results will show a Pass or Fail for the 30 year, 2% mod, or for a 40 year mod or for principal reduction. You may need to adjust your budget figures until the Calculator shows you a PASS for one of the Waterfall categories.
The secret to the Wells Fargo loan modification approval formula is knowing ahead of time how to adjust your budget figures so that you PASS and that you be able to submit an acceptable financial worksheet with your loan mod application. Visit MyLoanModificationCenter.com for more tips and information.