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Often times homeowners fall into financial hardship and need to work with a lender to get a loan modification. Sometimes loan modifications are called workout plans, restructuring, or mortgage modification. What this means is the lender will work with the homeowner to change the terms of the current mortgage loan so the homeowner will be able to afford the payments.

Making Home Loans Affordable

Making the payments affordable can be accomplished through various means – refinancing the loan, paying a lower interest rate, extending the terms of the loan, or rolling past due payments into the total loan amount. All of these are ways to avoid the homeowner from being pushed into foreclosure.


In 2009, the government unrolled the Home Affordable Modification Program (HAMP). This program was designed in order to help provide relief to struggling homeowners. HAMP reduces homeowner’s mortgage payments to 31 percent of their pre-tax monthly income. While not all lenders participate in HAMP, you should be able to get a loan modification if you appeal to your lender. More often than not, they are looking to help struggling homeowners avoid foreclosing on their homes.

Loan Modification and Credit

You might be concerned with the effect a loan modification might have on your credit. While most homeowners that participate in HAMP don’t see a dip in their credit score, there is no guarantee that a loan modification won’t impact your general credit score. However, the government has set up requirements regarding how lenders report HAMP. It has been set up in such a way as to not harm your current credit score.

Other Available Options

It’s important to remember that there are still available options for you if you can make your mortgage payments and don’t qualify for a loan modification. You could short sell your home, return the home to the lender via a “deed-in-lieu of foreclosure,” get a forbearance, or find a tenant that you can rent your home and use the money to repay the lender.

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