Loan modification debt to income ratio
Knowing your debt to income ratio is extremely important if you are planning on embarking on a loan modification.
A bank does not want to go through the hassle of modifying a loan for someone that will probably not be able to pay it back anyways, so they definitely like to know as much about the homeowner’s finances as possible this includes the debt to income ratio.
President Obama has set 31 percent as the most that a loan can be modified for payments each month. That means that if you bring home 4,000 dollars a month theoretically, you cannot have more than a roughly 1,200 dollar mortgage payment each month. That is obviously great news for homeowners going through a loan modification and bad news for a bank.
For example, what if the homeowner is unemployed and hardly taking any income home each month? Does the 31 percent rule still stand? Yes it does, and that can be devastating to the chances that a loan modification deal will actually end up going through.