Getting a loan modification isn’t easy. As I have often written, the loan modification process can be long, complex, and costly. Banks and loan servicers routinely lose paperwork and make the process a thousand times harder than it needs to be. Borrowers, however, need to do their part in making it easier to get a loan modification. One important part of this is being able to show reliable, documented income.
For a loan servicer to agree to a loan modification, the servicer needs to be convinced you have income. In order to do this, the servicer will likely request paystubs or a profit/loss statement if you are self-employed. Additionally, the servicer will also want to see your bank account statements, showing that you actually received this income. If you don’t have a record of this, you make it much hard to get a loan modification. If you plan to apply for a modification, be sure that you deposit your income into a bank account, and keep copies of your monthly statements. This is especially true if you work for yourself or have rental income: if the servicer can’t see a record of it, they are less likely to consider it as income.
I often get asked about “prospective” income: income from future sources. For example, some people wish to acquire income from renting rooms in their home or starting a business. Generally, a servicer won’t consider uncertain income: you need to show consistent income before qualifying for a modification.
If you aren’t showing income and need a loan modification, don’t despair. It is possible at times to get a “no document” loan modification or work out some other deal with the servicer. However, to increase your changes of getting the modification, showing documented income is always the best course.