Loan Modification Tips!

Beware: Banks Are Analyzing Expenses!

As the modification industry progresses, banks are getting more experienced and precise. In its infancy, banks were generally not looking too deeply into soft expenses entered on the budget form. Therefore homeowners and modification companies could manipulate these soft expenses to produce a specific DTI or disposable income. Banks were too inexperienced and understaffed to know how to verify this information.

Many of the banks and lenders have caught on this ‘massaging’ of expenses. They are now adding up charges on the bank statements that are provided and adjusting figures. Therefore, if you have $500.00 in grocery expenses and $300.00 in restaurant charges, you better have your food at about $800.00. If you stated that you only spend $400.00 in food, your numbers might be adjusted by $400.00. This has the ability to throw off your disposable income or DTI enough to cause homeowners to be disqualified.

This is the same principal with utility bills and other soft expenses. If you say that your cable is only $50.00 and you have a charge from your provider for $150.00, they can adjust it. While banks are still very backed up, they have been known to review this closely. If you are borderline per their guidelines, your bank statements matching, or not matching, your budget can be the deciding factor.

If you do have to massage your expenses to qualify, make sure that you are not on automatic bill pay and do not pay with debt card linked to the bank account(s) you are submitting statements for unless the numbers match up precisely. Checks do not show who the payee on bank statements. Banks are not requiring credit card statements. Remember, banks have a reason to require certain documents to qualify homeowners for loan modifications. Bank statements are very telling about a person’s spending habits, especially if they use their debt card a lot.