Home loan modification is one of the most sought-after solutions for mortgages at risk of foreclosure. Since the launch of the government’s Home Affordable Modification Plan in February 2009, thousands of homeowners have been given home loan modifications and a chance to stay in their homes. And while the housing crisis isn’t quite over, experts are assured that modification of home loan will continue to protect borrowers from the blow.

How do home loan modifications work?

In a home loan modification, you and your lender agree to change the terms of your loan to reduce your monthly payments. They may do this by reducing your interest rate, giving you a longer loan term, or changing your loan from and adjustable-rate to a 30-year fixed rate mortgage. On average, a modification of home loan will save you around $812 per month, but the real amount can range from a hundred or so to several thousand dollars.

What do I need for a home loan modification?

The requirements vary from lender to lender, but for most home loan modifications, you need to be in financial hardship and prove that a home loan modification is your best bet. To do this, you’ll have to provide a number of financial documents.

These may include:

• Bank statements from the past two months
• Pay stubs or other proof of income from the past two months
• Tax forms from the past two years
• Your most recent property tax and mortgage statements
• Supporting papers for your hardship claim, such as divorce papers or medical bills

Another important requirement is a hardship letter. This is where you explain how you fell behind and why you’re asking for a modification of home loan. It has to be brief but detailed, and written in a way that convinces your lender that you deserve mortgage aid.

Do I need an attorney or agent?

It’s possible to do a home loan modification alone, but studies have consistently shown that borrowers working with professionals are more likely to get home loan modifications. Besides helping you with the paperwork, an experienced agent or attorney can help you better understand the modification of home loan and how it can affect you, and come up with negotiation strategies to help you get the best deal.