Applying for a loan modification can be a complicated process. There are a lot of steps involved in the application. It’s important to carefully go through all the steps to give your loan modification application the best possible chance of approval.
There are a lot of different parts of loan modification applications. Details may seem unimportant, but they can be extremely influential to your application and help you avoid foreclosure with a loan modification. A contribution letter can be an important factor in getting approved for a loan modification.
Working with a loan modification attorney can help you get a loan modification more easily. Contact Denbeaux & Denbeaux today to learn more about how we may be able to help you with your loan modification.
What Is a Contribution Letter?
A contribution letter is a letter that’s included in your loan modification application about your finances toward mortgage payments. In this letter, you should include any monthly payment you receive from someone not on your mortgage. The monetary contribution must be something that can be considered “household income.”
Contributions can only include specific types of monetary contributions. For example, if a family member is helping you make your payments, you must report that in your contribution letter. However, alimony or child support payments aren’t considered household income. They are reported separately as part of your income.
It’s also important to note that rent can’t be considered household income for a contribution letter if you rent a room in your home. This income is also reported separately as income you’re receiving.
These complexities of how additional income is considered as part of your income can make it difficult to write a contribution letter in a loan modification. What you include impacts how a lender views your ability to make payments on your loan. Working with an attorney can help you figure out what to include so you can prove the right amount of income possible to get the most advantageous loan modification for you.
What to Include in Your Contribution Letter
There are a lot of different things that are important to include in a loan modification contribution letter. Consulting an attorney can help make sure that your contribution letter includes all of the appropriate information.
You must show that the income contribution you’re receiving is consistent. You should only report income in a contribution letter that you’re receiving in a consistent amount each month.
Proof of the contribution income is just as important as receiving the contribution. You need to be able to show that you’re receiving the money. If you’ve been given the contributions in cash, you can show the deposit information as proof. If you’re receiving the contribution in cash, make sure you’re depositing it as soon as possible to prove that you’re receiving the funds.
Make sure that you’re reporting contributor information correctly on your application. As part of your initial application, your lender will ask about your income, including contributor income. This is important to your application because it gives the bank as much information as possible as early as possible.
It’s required to include letters of declaration in your contribution letter. You will need one declaration letter confirming the income from each contributor, the amount, and where it’s deposited. You will also need to include a letter of declaration from your contributor confirming the amount they are paying you each month.
Things to Consider in a Contribution Letter
With a cash contribution, it’s important not to spend any of the money before depositing it so you have proof of the accurate contribution amount. If you’re receiving the contributions in cash and not depositing the money, it could create an issue on your contribution application.
You should be careful to make sure that reporting the contribution will help your chances of loan modification approval. In some instances, reporting additional income may not help your case with your lender.
When applying for a loan modification, it’s crucial to demonstrate that you have enough income to pay your mortgage payments without being at risk of default. If your mortgage payment is a high percentage of your monthly payment, adding contributor information could help improve your chances of approval.
If you have a high income, adding contribution information to the loan modification application could make your total income too high. Too much income could make it more difficult for you to get a loan modification or completely ineligible.
Be careful that the bank isn’t going to make the contributor a co-borrower on your mortgage. This is rare, but it can happen. It’s essential to look out for this because it could alter your mortgage and impact your contributor.
Before including contributor information, it’s important to make sure that the contributor doesn’t have to live in the home. Some lenders will require a contributor to live in the home for the contribution to be counted as household income. If your contributor doesn’t already live in the home and you don’t have plans for them to, counting them as a contributor could be a mistake.
Some lenders will run a credit check on a contributor in their loan modification application process. If your lender will do this, it’s a good idea to find out so you can give your contributor a heads-up that their credit will be checked.
Get an Attorney For Writing a Contribution Letter
All aspects of a loan modification application can be complicated, especially if your application involves contributors. Loan modification contribution letters have specific guidelines you must follow and information that must be included.
An attorney can help make the process of writing a contribution letter easier for you. An experienced attorney can help guide you through the application process.
Contact Joshua Denbeaux today to learn more about how we may be able to help you with your loan modification application and contribution letter.
