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It can help you avoid foreclosure and make your monthly payment more affordable. Unlike a refinance, a home loan modification doesn’t pay off your current mortgage and replace it with a new one. A lender won’t allow you to refinance unless you’re current on your monthly payments. Some types of refinances for underwater loans require that you have at least six consecutive on-time payments to qualify. Seek a modification if you can’t catch up on your monthly payments before you apply.

The federal Home Affordable Refinance Program, or HARP, helped underwater homeowners refinance into a more affordable mortgage. Fannie Mae's High Loan-to-Value Refinance Option and Freddie Mac's Enhanced Relief Refinance replaced HARP in 2019. Don’t do business with a company that guarantees you’ll be granted a loan modification. These “auditors” often charge hundreds and claim they can accelerate the modification process or cancel your loan. Having their past-due amount added to their outstanding principal balance and calculating a new repayment schedule.
If you’re struggling to make your mortgage payments, a home loan modification may be a good option.
Qualification criteria for mortgage assistance vary, but even out-of-work homeowners with conventional loans can qualify for federal and state assistance programs. Many state and local social services organizations help struggling homeowners seek and obtain mortgage assistance. Lenders holding conventional mortgages on their books aren't under any obligation to offer mortgage assistance, but many actually do.

The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials. But the requirements depend on the program you pursue, and you must get approval. Expect your loan modification process to take anywhere from one to three months, according to finance and insurance expert Karen Condor. Once your loan modification has been approved, the changes to your interest rate and loan terms are permanent. For instance, FHA loans have lower credit score requirements and allow higher DTI ratios than conventional loans.
What is a home loan modification?
The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners. This is similar to refinancing your loan, but the difference is that you don’t have to pay closing costs or fees. Active-duty service members and their families facing payment challenges may qualify for special military benefits.

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Getting Preapproved for a VA Home Loan
If you’re less than 90 behind on payments, you must complete a borrower response package. If you have lates on your new modified mortgage, almost all lenders will require a 12 month waiting period from the date of the last late. Alot of lenders also look for perfect credit after a loan modification.

FHA-HAMP allows the lender to defer missed mortgage payments to bring the homeowner’s loan current. It can then request that HUD (FHA’s overseer) further reduce the monthly payment by opening an interest-free subordinate loan of up to 30% of the remaining loan balance. The borrower only pays principal and interest based on 70% of the balance, and can pay back the remainder upon a sale or refinance of the home.
Lender-Level Mortgage Assistance
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“Once a lender has an executed contract — meaning the home loan — they don’t have to change it. Many are denied a mortgage loan modification,” Gallagher explains. “Sometimes, a borrower who has experienced financial setbacks, which makes a default imminent, can qualify for a loan modification. But not everyone in default under their mortgage is eligible for a loan modification,” says Elizabeth Whitman, attorney and managing member of Whitman Legal Solutions, LLC.
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Keep in mind, loan modification is intended to make a mortgage more affordable month-to-month. But it often involves extending the loan term or adding missed payments back into the loan — which may increase the total amount of interest paid. Typically, lenders will ask you to complete a loss mitigation form. Because foreclosures are so costly for investors, a loss mitigation form helps them look at alternatives, such as loan modifications, to figure out what makes the most financial sense. There are several ways your mortgage lender can modify your home loan, from reducing your interest rate to making your mortgage longer in order to lower your monthly payments.
Things like medical bills or a termination letter from your previous employer can increase your chances of approval. If you have a conventional mortgage, you can ask your lender or servicer about the Fannie Mae and Freddie Mac Flex Modification programs. These programs allow borrowers to extend their loan terms to 40 years . Various lenders offer different types of home loan modification programs. One program which is popular is the Home Affordable Modification Program .
For more information about how to avoid foreclosure, use our checklist. If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. Homeowners with FHA loans, VA mortgages, and USDA loans have an additional option in the form of Streamline Refinancing. As an example, if the rate on your current loan is 4.0%, the Refi Possible program drops the rate to 3.5% or lower.