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Loan Modification Overview

A loan modification is a change in the terms of your mortgage loan. It could be a change in the interest rate, or a change in the type of loan, or a change in the payoff period. It could be through one of the government Home Affordable Modification Programs (HAMP) or not (either way, the loan modification can only be approved by your mortgage lender).

The government, at least, has consistently pushed loan modifications as the one and only solution for underwater and/or distressed homeowners. If you�ve spent even a few minutes on Homeowner101.com you know that actually a loan modification is just one of a range of options for underwater and distressed homeowners. For some homeowners, in some circumstances, a loan modification is the right option.

    A loan modification might be right for you if�
  • You can demonstrate a legitimate financial hardship (why you can no longer afford your current mortgage payments)
  • Your negative equity is less than 10 percent (meaning, you owe less than 110 percent of the value of your house)
  • You plan to live in the house for at least five more years
  • You have at least 6 months of living expenses saved in a rainy day fund
  • Youâ��ve fully-funded your retirement accounts
But you won�t really know what�s right for you until you get the Underwater Homeowners Assessment and Action Plan.

Loan Modification Pros & Cons

Loan Modification Pros

  • Most mortgage holders wonâ��t consider a loan modification unless youâ��ve missed mortgage payments (thatâ��s often the first pre-requisite in determining your financial hardship), so you credit score will likely be negatively affected to some degree. But the loan modification itself wonâ��t have any negative effects on your credit like a short sale or foreclosure will.
  • If youâ��re not too deep underwater, want to stay in your home for the long term, and can truly afford your modified mortgage payment (meaning that it allows you to still contribute to your rainy day fund, retirement funds, and kids education) then a loan modification could be your path back to the place where homeownership is a source of financial stability and peace of mind.

Loan Modification Cons

  • The loan modification process is notoriously slow; weâ��ve heard many stories from homeowners whose lenders continuously â��lostâ�� modification paperwork or put holds on the modification process. If youâ��re going to pursue a loan modification, patience will be key.
  • Sometimes, lenders will agree to a â��temporaryâ�� modification to help you get back on your feet. Watch our loan modification video to hear a story about this â�� it doesnâ��t always turn out badly, but you need to have a loan modification professional review all of your paperwork to ensure that you completely understand the terms of your modification.
  • If you modify your loan today to a more affordable level, youâ��re still going to be underwater â�� probably for many, many years. What if in two years you lose your job or encounter some other financial hardship? Your options for getting out from underneath your mortgage debt may be more limited then than they are now.

Is a foreclosure the right decision for you? You won�t know until you sit down one-on-one with an experienced professional to evaluate your unique circumstances.

Loan Modification Resources

Homeowner 101 Authorized Loan Modification Consultants

Loan Modification in the News

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Loan Modification Resources

Loan Modification Scam Alerts

Loan Modification Videos

Underwater Homeowners: Is Loan Modification Right for You?

Most government mortgage help programs are about loan modification. Some banks, too, have said that they will modify mortgages for homeowners who need help. But for under water homeowners, is loan modification the right decision?

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Take Action

Some programs and organizations say that loan modifications are always the right option for every underwater and/or distressed homeowner. Others say that loan modifications are never anything more than a bureaucratic nightmare that, in the end, lands the homeowner right back where she started.

The truth, as it always does, lies somewhere in between. For some homeowners in some circumstances a loan modification is the best decision that that homeowner�s financial future. For other homeowners in other circumstances, it is not.

So unless you�re going to listen to the �loan modifications are always right� or �loan modifications are always wrong� camps you really need to get a holistic picture of your financial situations � and the advice of experienced professionals � to determine whether a loan modification is for you the right path back to a place where homeownership is a source of financial stability and peace of mind. That�s exactly what you�ll get from the Underwater Homeowners Assessment and Action Plan.

Learn more about the Underwater Homeowners Assessment and Action Plan

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