Brandy

No a loan modification doesn't hurt your credit. And you don't have to been in arrears to recieve a modification. The modification is usually just a different payment option. For example the lender may offer you a lower rate fixed for 5 years and put your delinquent balance on the back of your principal balance. Unfortunately we have no idea if in 5 years the property values will support the increase in your principal. Therefore you may end up in the same bad situation especially if you need to sale your home because you can't afford it. Plus your payment will increase drastically at the end of the five years putting you in the same position you are in now. Which makes me wonder why they offer these modifications knowing there is a possibility of crashing the housing market again in 5 years.

Ask about the Housing Rescue Bill. Please, Please do as much research as possible before you accept any loan. If you don't like an offer turn it down. DO NOT put yourself in another bad situation.

Despite what people tell you, Short sales do affect your credit negatively. But if your payments are already behind then your credit is hurting anyway. Don't be afraid to ask for help. Good luck. - Wed Oct 1 2008, 07:21