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Whats a Home Loan Modification?

How to Qualify for a Home Loan Modification

A loan modification is a permanent change to a home loan (mortgage or home equity loan) that is agreed to by both the lender and/or the mortgage servicer and the borrower. Lenders and mortgage servicers modify loans to help homeowners in a time of hardship. There are numerous types of hardships that qualify borrowers for a loan modification.


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The goal of the home loan modification is to make the home loan affordable for the borrower in the long term. A typical loan modification may result in a permanent, reduced fixed rate or a temporary interest rate reduction. In addition, some lenders may agree to reduce the principle balance of the loan as well.

In the past, loan modifications used to only be given to borrowers when they were behind on payments and if they had serious hardships such as loss of employment, illness or death in the family. Now there are many lenders that are willing to modify the terms of a home loan due to unaffordable interest rate adjustments or simply a change in income.

To qualify for a loan modication, you must describe and document your hardship to your lender, even if it is not permanent. You must also be able to afford to make modified payments. Even if your hardship is not permanent,

Qualificatoins for Loan Modification

Hardships that justify a loan modification:

  • Adjustable Rate Mortgage Reset-Payment Shock
  • Illness of the Borrower
  • Illness of a Borrowers Family Member
  • Curtailment of Income
  • Loss of Job
  • Abandonment of Property
  • Property Problem
  • Inability to Sell the Property
  • Inability to Rent the Property
  • Mortgage Servicing Problems
  • Transfer of Ownership Delays
  • Reduced Income
  • Failed Business
  • Job Relocation
  • Death of the Borrower
  • Death of Spouse or Co-Borrower
  • Death in the Family
  • Incarceration
  • Divorce
  • Marital Separation
  • Military Duty
  • Medical Bills
  • Damage to Property (natural disaster or unnatural)
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