What Are the Requirements for a Home Loan Modification?

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Many a borrower is requesting a home loan modification in order to make mortgage payments affordable and to avoid foreclosure. Lenders are flooded with requests every day from borrowers seeking relief from their mortgage payments, and most won't qualify for loan modifications. You must meet certain criteria and have an unforeseen circumstance that has changed your finances. You must also prove that you may not be able to afford your current payment but you can afford a reduced payment. If you meet the following requirements for a loan modification, then you can ensure an approval.

Financial Need

You have to show a financial need in order to qualify for a loan modification. This need must be something unavoidable. Acceptable reasons would be job loss, death of a spouse/child, illness or disability. If you can't pay your mortgage because you have racked up a lot of debt and bought a new car, then you will be denied. These were poor decisions you made, and the lender will not help. The cause of your inability to pay your current mortgage payment must be a serious life change that negatively affected your finances.

Ability to Pay

Although you will be demonstrating a financial need, you must also show that you will be able to make your new payment. Lenders agree to perform loan modifications in order to avoid foreclosures. A loan modification may be a temporary lowered payment or a permanent lowered interest rate. If you have a temporary financial due, for example, to a job loss, you can explain how much you make and how you are looking for new jobs. You can prove that you will be able to afford the new payment for now and the original payment six months from now. If you are asking for a lowered interest rate, then you need to demonstrate why you can't afford the current payment but that the new payment will be easier. For example, if you used to make a certain salary but are now permanently disabled and make only 60 percent of your former income, then a permanently reduced payment would be affordable on your new fixed income.


In order to obtain a loan modification, you need to contact your lender. They will have you compete an application and a hardship letter. The application will specify how much you make, your debts and monthly expenses. The hardship letter will detail why you need a loan modification. This is where you lay out the details of your personal situation to the lender. You do not want to falsify any information. The lender will pull your credit to see what current debts you have and what recent purchases, like a car, you may have made. Once you complete the application and letter, the lender will review them and make a decision about whether you meet the requirements for a loan modification.