Loan modification is one of the debt relief options that can help you manage your mortgage. If you miss payments on your home loan, or if you are in default, the lender can opt to foreclose. It is through loan modification or mortgage modification that you may be able to save your home.

Changes in the Term

Any changes done to the original term of the loan is known as loan modification. When you cannot keep up with the current payments on your home loan, you can opt for mortgage modification. With mortgage modification you can potentially lower the interest rate and change the time frame within which the loan will have to be repaid. 

Furthermore, you can get other repayment options like that of a lowered principal amount. In order to take advantage of these options, you will have to negotiate with the lender. You will have to let the lender know the problems you are facing and provide proof of your financial hardship. The lender may agree if they determine they will save money on this method versus foreclosing on your home.

There are also government approved loan modification programs, and these are easier than the standard modification programs. The government approved mortgage modification program is known as HAMP or the Home Affordable Modification Program.

To Apply for Loan Modification:

1. Find out if you are eligible for the modification - Some of the eligibility factors are loan balance, the condition and value of your property, the time you have been facing financial hardship, and the investor guidelines with regards to the person who owns the loan. Furthermore, in order to be eligible for the modification, you will have to show that you are experiencing financial hardship. You will have to provide documentation and mention that you would like to retain the home.

2. Provide required documentation - You will have to provide the required documentation to your lender. This includes your income, your bank statements, copies of your pay stubs, and so on. You will also have to provide most recent statements of your bank accounts, CDs, bonds, IRA and other retirement accounts.