In this blog, we will cover FHA guidelines on mortgage after loan modification. FHA Guidelines on Mortgage After Loan Modification for new home buyers require a one-year mandatory waiting period. HUD, the parent of FHA, is the giant federal agency that administers FHA guidelines on mortgage after loan modification. Per Alex, of Gustan Cho Associates, the following advice is given on FHA guidelines on mortgage after loan modification.

FHA guidelines on mortgage after loan modification applies for both FHA purchase loans as well as FHA refinance loans. Most homeowners with a mortgage loan modification often get a reduced mortgage interest rate. Some even as low as a 2% mortgage interest rate. It is often rare to see a rate and term refinance mortgage after a mortgage loan modification. There is a one year waiting period of timely payments after loan modification to qualify for FHA loans.

Mortgage loan borrowers can refinance with an FHA cash-out refinance mortgage. Homebuyers who had a prior loan modification can now qualify for an FHA loan after a loan modification. Need to meet the mandatory waiting period of 12 months after the loan modification. Also need to meet other credit requirements under FHA guidelines on mortgage after loan modification.

FHA Guidelines on Mortgage After Loan Modification and Credit Requirements

A mortgage loan modification is when a homeowner asks their mortgage lender to change the terms of their current mortgage loan. This change reduces their monthly mortgage payments because they can no longer afford their current mortgage payments. There are many reasons why homeowners request a loan modification.

But the most common reason for loan modification requests is due to unemployment and/or underemployment and other extenuating circumstances such as the following:

• divorce
• health issues
• death in the family
• loss of employment
• loss of business and major reduction of income

Difference Between Loan Modification Versus Foreclosure

Borrowers with extenuating circumstances who feel they cannot make mortgage payments contact the current lender immediately before going in arrears. Lenders will work with homeowners and can plan a forbearance or loan modification. Lenders do not want borrowers’ homes, regardless of their equity. To qualify for a loan modification, homeowners need to be employed. Dale Elenteny of Gustan Cho Associates issued the following statement on FHA guidelines after loan modification about mortgage lenders:

The mortgage lender will want to see financials, especially what the borrower is currently making and how much in housing payments they can afford.

The loan modification division of the mortgage company will thoroughly review financials and the current mortgage status. The lender may decide the borrower is a great candidate for a loan modification. Once approved for a loan modification, the mortgage loan originator can present several programs that are best tailored to the homeowner. Mortgage lenders may decide to put the amount in arrears behind the back of the mortgage balance. Talk to an expert Loan Officer about FHA mortgage after loan modification

Types of Repayment Plans

The lender can lower mortgage and interest payments and extend the loan term. Or they may decide to forgive part of the mortgage balance. Forgiveness may include the amount borrowers are in arrears and reducing the mortgage interest rate so the monthly payments will be affordable.

Once the lender grants a mortgage loan modification, Homeowners can decide to sell anytime and qualify for an FHA loan after 12 months. There is a one-year mandatory waiting period after a loan modification to qualify for FHA home loans.

Borrowers must have made mortgage payments on time for the past 12 months. No late payments are allowed. Lenders also do not want to see any late payments with any other debts after a loan modification.

Borrowers Who Have Problems Getting Mortgage After Loan Modification

The team at Gustan Cho Associates gets many phone calls from mortgage borrowers who have trouble qualifying for an FHA loan after loan modification due to the mortgage lender overlays.

As mentioned earlier, HUD requires a one-year mandatory waiting period to qualify for an FHA loan after a modification. Borrowers must have been timely with all of their payments in the past twelve months after the loan modification.

Mortgage lenders have their waiting period after loan modification requirements. Some require two years after a loan modification. Others require a four-year waiting period after loan modification for a mortgage loan borrower to qualify. Click here qualify for mortgage after loan modification 

Frequently Asked Questions (FAQs)

• What are FHA guidelines on mortgages after loan modification?
  FHA guidelines outline the eligibility criteria and requirements for borrowers seeking an FHA-insured mortgage after undergoing a loan modification.
• Can I qualify for an FHA-insured mortgage after a loan modification?
  Yes, qualifying for an FHA-insured mortgage is possible after a loan modification, but certain conditions must be met.
• What are the waiting periods for FHA mortgages after loan modification?
  The duration of waiting can fluctuate depending on the type of loan modification and the borrower’s circumstances. Generally, borrowers may be eligible for an FHA-insured mortgage after making timely payments on the modified loan for a specified period, typically at least 12 months.
• Do FHA guidelines require documentation of the loan modification?
  Yes, FHA guidelines typically require borrowers to provide documentation of the loan modification, including details of the modification agreement and evidence of timely payments.
• How does a loan modification impact my credit score when seeking an FHA mortgage?
  A loan modification may temporarily impact your credit score, but making timely payments on the modified loan can assist rebuild your credit over time.
• Do FHA guidelines impose additional requirements for borrowers with a history of loan modification?
  Borrowers with a history of loan modification may face additional scrutiny during the underwriting process. Lenders may assess the reasons for the modification, the borrower’s financial stability, and their ability to repay the mortgage.
• Am I eligible for an FHA mortgage if I’m still undergoing the trial period for loan modification?
  Generally, borrowers must complete the trial period and demonstrate a timely payment history before qualifying for an FHA-insured mortgage. However, some exceptions may apply depending on the lender’s policies and FHA guidelines.
• Are there any restrictions on the type of FHA mortgage available after a loan modification?
  FHA guidelines may impose certain restrictions on the type of FHA mortgage available to borrowers after a loan modification. For example, borrowers may be limited to certain FHA loan programs or terms.
• Can I use the FHA streamline refinance program after a loan modification?
  The FHA streamline refinance program may be available to borrowers with an existing FHA-insured mortgage, including those who have undergone a loan modification. However, specific eligibility requirements apply, and borrowers should consult their lenders for guidance.
• Where can I find more information about FHA mortgage guidelines after loan modification?
  Borrowers can consult the FHA Handbook (HUD Handbook 4000.1) or speak with an FHA-approved lender for detailed information about FHA guidelines and eligibility requirements.

Qualifying For FHA Loan With a Lender With No Overlays

Borrowers who were told they do not qualify for an FHA loan after loan modification by other lenders, no worries. Contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at alex@gustancho.com. We have no mortgage lender overlays on FHA loans after loan modification. Gustan Cho Associates has zero lender overlays on FHA loans, VA loans, USDA mortgages, and Conventional loans. We are also correspondent lenders on non-QM loans and bank statement loans for self-employed borrowers.

Qualify for FHA loan with a lender with no overlay