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The Evolution of Credit Card Usage 
Homeownership

Principal Reduction Alternative (PRA)

April 2024
·
Melinda Opperman
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A federal program that reduces your mortgage principal if you owe more toward your mortgage than your home is currently worth.

Principal Reduction Alternative, or PRA, encourages your mortgage lender to reduce the amount you owe. Currently there are over 100 loan servicers participating in this program.

A notebook with "principal reduction alternative" written on a page for paying down the principle

Program Qualifications

To qualify for PRA, you must meet certain eligibility requirements:

  • Your loan is not a Fannie Mae or Freddie Mac loan.
  • Your home is worth less than you owe.
  • You owe less than $729,750.00.
  • You live in the house.
  • You first got the mortgage before 2009.
  • Your monthly payment is greater than 31% of your income.
  • You have a financial hardship.
  • You can prove you have enough income to make your new house payment.
  • You have not been convicted of certain crimes.

How to Apply

These are just guidelines, of course. To see if you are fully eligible, you’ll need to contact your mortgage servicer. Of course, a housing counselor from a HUD-approved housing counseling agency can answer your questions and help you understand all of your options.

Counseling is free, and can help you apply for the right program for your unique situation. Talk to a housing counselor today.

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Article written by
Melinda Opperman
Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over two decades of experience in the industry.

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