The loan modification process can be a difficult one; full of frustration and confusion. If you're one of these homeowners, considering contacting a bank about a loan modification to help avoid the dreaded foreclosure, you need to know the answers to these 10 questions.

Top Ten Questions to Help You Understand How the Process Works

Q: Will a loan modification help me stop foreclosure?
A: Yes, that's the ultimate goal.

Q: What exactly is a loan modification?
A: A loan modification is a permanent change to the terms you have with your lender that will ultimately result in terms you can afford.

Q: Can the lending institution require an inspection of the property?
A: Unfortunately, the lender may conduct any review at any time that it feels is necessary to verify the property doesn't have any physical conditions that would negatively impact the home's value. However, you do not legally have to allow them in, but denying them an inspection will hurt your chances for getting a positive resolution to your current situation.

Q: Will I qualify for a loan modification?
A: The primary item of criteria your lender is looking at is your ability to make the new updated payment. You'll have to prove to the bank that you can pay the payments by supplying proof of your income, along with a complete and accurate financial statement detailing your income and expenses. This will show them that if they modify your loan, you'll be able to afford the new payment.

Q: Do I currently have to be behind on my payments to be considered for a loan modification?
A: Almost all banks are now taking applications from homeowners who aren't currently delinquent, but who are able to provide proof to their bank that due to a hardship like an interest rate increase, they can no longer pay their current loan payment.

Q: Can the payments that I've missed be added back into my new, modified loan?
A: Yes, the arrears can be added to the new loan balance.

Q: Should I do the loan modification myself or should I pay someone to represent me in the process?
A: That's your prerogative, and you should judge that decision based on your comfort level. Remember though, most financial institutions require a large fee $1500 or more while "do it yourself" packages can cost $50-$200.

Q: Can the lender include late charges in the agreement?
A: Actually, the late charges accrued should be waived by the lender at the time of the loan modification as per HUD.

Q: So, how can I begin the process of modifying my loan?
A: First, before you contact your bank's loss mitigation department, do your homework and learn as much as you can about the loan modification process so you can make informed decisions.

Q: What's considered an acceptable hardship situation?
A: Each situation is unique and has its own set of circumstances that may have caused a borrower to fall behind on their home loan payments. A compelling hardship letter included in your application is very important when it comes to a loan modification application being accepted. Generally though, the following are considered hardships:

- Divorce/Separation
- Loss of Income
- Death of a spouse
- Illness
- Job relocation
- Military Service

I feel informed about loan modifications, now what?

You can find a lot of useful information on the internet about loan modifications, but it can be difficult to get all the information you need together in one easy packet. You must do this, however, so that you're prepared to visit your bank and are educated when you do so. Make sure you do your homework and have all of the proper and accurate documentation when you're ready to pursue your loan modification.