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A loan modification is an agreement made between you and your lender which will change the original terms of your mortgage. It may include a reduction in your interest rate, an extension of the length of time for repayment, a different type of loan, a reduction in payments, or a combination of these options.  

These changes are usually made because the borrower is unable to repay the original loan. Some borrowers are eligible for government assistance in loan modification.

In order to qualify for a loan modification your lender will require you to show your ability to start making payments again.

A short sale is when a borrower sells their home for less than what they owe on their mortgage. Additional liens can also be negotiated in the sale of the property. This can include second mortgages, home equity lines of credit (HELOC), homeowners association liens, mechanics liens and IRS and State Tax liens. Lien holders do not have to agree to accept less, but they often do since the alternative is to let the property go to foreclosure. A short sale is a more beneficial alternative to foreclosure for all parties involved. 

Benefits of opting to do a short sale over foreclosure:

• It won't impact your credit as negatively as a foreclosure. 
• You may not have to pay a deficiency judgement. 
• While the bank must approve the offer, you are still in control of the sale of your property.
• The property is sold "As-Is" meaning you are not required to pay for any repairs in order to sell. 
• In some cases your lender will actually pay you an incentive to doing the short sale over allowing it to go to foreclosure. 

When a foreclosure show up on your credit report it can make it virtually impossible for you to buy another home for years. A deed in lieu of foreclosure can release you from your mortgage responsibilities and allow you to avoid a foreclosure on your credit report.

A deed in lieu agreement is an arrangement where you voluntarily give the lender that owns your mortgage the deed to your home. Homeowners agree to deed in lieu agreements in order to avoid foreclosure.

When you hand over the deed, the lender releases its lien on the property. This allows the lender to recoup some of the losses without forcing you into foreclosure. When you turn over your deed, the lender also releases you from anything else you owe on the mortgage. Many homeowners seek deed in lieu agreements when they owe more on their home than the home is worth.  

It’s important to remember that your lender has no obligation to accept a deed in lieu agreement. Some lenders may even require you to attempt a short sale prior to reviewing or accepting a deed in lieu.