What Are the Requirements for a Loan Modification?

If you're struggling to pay your mortgage bill each month, there is hope: the federal government's Home Affordable Modification Program. This program, better known as HAMP, provides monetary bonuses to mortgage lenders who work with struggling homeowners to modify their loans and reduce their monthly payments. The goal is to reduce these payments enough so that these homeowners won't lose their residences to foreclosure. If you are looking for a loan modification through this program, though, you'll have to meet certain requirements.

The Money You Owe

To qualify for a HAMP modification, you must not owe more than $729,750 on your first mortgage loan. If you do owe more than this -- such a loan type would be known as a jumbo loan -- you'll have to acquire a loan modification outside of the government program. Fortunately, lenders don't have to participate in HAMP to modify the home loans of their borrowers.

Timing and Home Type

You won't be able to participate in a HAMP modification if you took out your mortgage loan after Jan. 1 of 2009. And you won't be able to participate if you are seeking a modification on a loan for any residence that isn't your primary home. This means that you can't get a modification through the program for a second home or a vacation home.

Financial Difficulties

You can only qualify for a HAMP modification if you are struggling to make your mortgage payments. Your monthly mortgage payment, too, must be more than 31 percent of your gross monthly income. Such a burden shows clearly that your mortgage payment has become out of your financial reach.

The Process

Even if you meet all these criteria, there's no guarantee that your mortgage lender will approve your request for a mortgage loan modification. HAMP doesn't require lenders to modify the loan of every struggling homeowner. You can help persuade your lender, though, by compiling a clear case that a financial setback has made it impossible for you to afford your mortgage payment. Write a financial hardship letter explaining why you can't afford your payments. The reason can be everything from a job loss or slashing of your working hours to the serious injury you suffered late last year. Gather and make copies, too, of any financial papers that you can use to prove that your finances are in bad shape. These papers include your most recent federal income tax return, current bank checking and savings account statements, credit card bills and most recent paycheck stubs. Mail, fax or e-mail this information to your lender.

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