Is it my primary residence?income?

[moonbird]

Hello, I am having a problem paying for my mortgage and want to do the loan modification. I have a question to ask. My husband and I own a house with 3 bedrooms and 2 bathrooms. We rented two rooms to three friends to help us pay for our mortgage. My husband and I with two small children occupy the masterroom. The tenants pay us in cash, no documentation at all. Is it still considered owner-occupied residence for loan modification purpose? Another question is about our income. Our mortgage only has my husband's name. Our income is coming from three parts: 1. self-employed about $2000; 2. other 1099 income: about $600, and 3. the rent I mention above $850. I am a stay-home mom who just quit a job two months ago for my baby. My 1st mortgage is $2135 and 2nd mortgage is about $250 now. It looks like we are using more than 55% of out gross income on the house. Will the bank refuse us because our income is too much less than what they can help to get to 31%? Is there anyone can answer me? Thank you very much!

[LHarveyMadman]

You live in your house, therefore it is owner-occupied.

What are the terms of your loan? Balance, interest rate? If you have a very high interest rate, then a modification to a lower interest rate might drop your mortgage-to-income ratio below the desired 33-38% threshold.

Before you quit your job, how much of your total gross income was going to the mortgage? If you can show that you were responsible with your mortgage in the past but are now in hardship because of the loss of income to care for your child, then this would theoretically work in your favor as you pursue a modification.

[moonbird]

Really appreciate your reply. My loan terms are:
1st mortgage:
Balance: $226,233.84
Interest Rate: 6% fixed for 30 years
Time bought the house: Feburary 22nd, 2006.
Principal&Interest $1410.15
Escrow Payment: $713.00
Total monthly payment on 1st: $2123.15.

2nd mortgage:
Balance: $72,884.54
Interest rate: prime+1%? now is 4.25%
Monthly payment is now $275.97

My escrow account was only $225 per month. It increased to $713 per month in 2008 because of the increase of property tax. Also, we borrowed equity to open a restaurant, but business failed in just several month in 2007 which leaves us a lot of other debts.