Loan modification or selling: which makes sense?
If you want to keep the house and can afford a lower payment, a modification may be the better road. Here's how to weigh the two.
No obligation. No pressure. Takes about 2 minutes.
The short answer
A loan modification changes your mortgage terms, such as the interest rate, the length of the loan or the principal, so the payment becomes affordable and you can stay. It's usually the better choice if you want to keep the home and your income can support the new payment. Selling makes more sense when the payment won't work even after a modification, or when you'd rather take your equity and move on.
Step by step
-
1
Apply through your servicer
Ask for a loss mitigation application and return it complete. Federal rules require the servicer to acknowledge it in writing within 5 business days and tell you whether anything is missing.
-
2
Know your protections
If your complete application arrives more than 37 days before a foreclosure sale, the servicer has 30 days to evaluate you for every option it offers. Federal rules also generally bar a first foreclosure filing until you're more than 120 days behind.
-
3
Run the real numbers
A modification only helps if you can keep up with the new payment. The CFPB warns you may still lose the home if you can't, so check how it changes both the monthly payment and the total you'll owe.
-
4
If you're turned down
You can appeal a denial of a loan modification if your complete application was received 90 days or more before a foreclosure sale, or before a sale was scheduled.
-
5
When selling fits better
If the payment won't work, selling on your own terms pays off the loan and protects your equity. A HUD-approved housing counselor can help you compare the two.
Sources: CFPB: What is a mortgage loan modification? ยท 12 CFR 1024.41 (loss mitigation procedures)
This page explains the general federal rules. It isn't legal advice. Your loan and state may add other rules, so talk to a housing counselor or attorney about your situation.
Cash offer vs listing
Example: a $250,000 home
| Offer | $205,000 |
|---|---|
| Repairs | $0 |
| Commissions | $0 |
| Closing costs | $0 |
| You walk away with | $205,000 |
| In 7 to 14 days | |
| Sale price | $250,000 |
|---|---|
| Repairs | about $8,000 |
| Commissions | about $13,800 |
| Closing and holding | about $6,000 |
| You walk away with | about $222,200 |
| In 60 to 90 days | |
Example only. Your numbers depend on your home and market.
If a sale is on the table, we'll show you what a cash offer and a listing would each net after your loan is paid.
Frequently asked questions
Can I apply for a modification and look at selling at the same time?
You can explore both. Keep your servicer informed and keep copies of everything you send.
How long does the servicer have to decide?
If your complete application arrives more than 37 days before a foreclosure sale, the servicer must evaluate it within 30 days.
Where can I get help comparing options?
A HUD-approved housing counselor. You can find one through the CFPB's Find a Counselor tool or by calling the CFPB at (855) 411-2372.
Who are you?
We are real estate investors based in Baltimore, helping homeowners since 2016. We buy houses directly for cash. We are not a licensed real estate brokerage and do not list homes ourselves; if listing could get you more, we show you the math so you can choose.