A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.

Loan modification is a process that can save many distressed homeowners, although it can be really confusing at the beginning, before you figure out how things work exactly. If you are thinking to contact your lender so as to work out a solution that could help you avoid the foreclosure, then you need to be prepared and educated enough; you need to know your choices and options and gather as much information as possible. It is a good idea to understand how loan modification works and what the advantages that come with it are.

If you want to know whether you qualify or not for a loan modification, then you need to find out the criteria; the most important one refers to your ability to respond to the payment installments once modified, both for now and the future. You will need to submit to your lender a proof of work and income, and a complete statement of your financial status, which will provide detailed information on the income - expense ratio. The basic idea is that you need to prove that the modification will help you afford the new payment, which will be significantly lowered.

Most of the lending institutions do accept loan modification applications even from people who are delinquent on their payments, provided that they can prove that the increase in rates will affect their ability to pay off their debt or monthly installments. The loan modification should happen because the old terms do not allow them to afford the payment any more. In this case it is strongly advised to contact your lender as soon as possible and start with the process early, whether you are delinquent or not.

Loan modification can help you avoid foreclosure and it's actually an option that can halt the foreclosure process once you work with your lender on finding an efficient solution on your loan status. You can negotiate the terms of modification yourself or hire an expert to do the job for you. In any case, this is completely up to you.