Even the words depending on who's listening either send shivers up their spine or send the hope of a possibility. Those words are "Mortgage Modification". To the banks this is a horrible scenario which is sending the entire financial system into a new dimension of misery. The after effects are still materializing through our financial system. So, buckle your seat belt and enjoy the ride.

Now, let's get down to business. What is a mortgage modification anyway? A mortgage modification is an agreement with your mortgage holder to modify the terms of your mortgage usually in your favor. Here's typically what happens. Your interest rate adjust to a payment that you can no longer afford to make. You or someone you hire submit a modification submission to the mortgage holder asking to reduce your mortgage payment and interest rate. The lender looks at your package and either grants you the modification or denies it. (If they rejects it, get the reason. You may be able to resubmit.)

Before you all go running to the phone to call your bankto ask for one, not everyone is eligible. So, be practical about it and ask yourself some serious questions. The answers will tell you whether you should pursue a modification or you should short sale the property.

1.Has the interest rate on your mortgage risen above 8%?

2.If you had an interest rate around 7%, could you afford the payments?

3.Are you willing to stop making payments which will affect your credit score to accomplish this?

4.Can you prove your income through tax returns, pay stubs, and/or bank statements?

5.Are you carrying a substantial amount of unsecured debt (i.e. Credit Cards)?

If you answered “No" to any of these questions, you should list the property with your local REALTOR(R) and prepare to get out because it's only a matter of time before the mortgage holder gets around to foreclosing/short selling on you.

If you answered “Yes" to all of the questions, you should be eligible for a modification. It's just a matter of determining whether or not you should do it or you should hire a professional.