FHA Guidelines On Mortgage After Loan Modification

This BLOG On FHA Guidelines On Mortgage After Loan Modification Was UPDATED And PUBLISHED On February 8th, 2020

FHA Guidelines On Mortgage After Loan Modification for new home buyers require a one year mandatory waiting period.

  • FHA Guidelines On Mortgage After Loan Modification applies for both FHA purchase loans as well as FHA refinance loans
  • However, most homeowners who had 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
  • However, FHA mortgage loan borrowers can refinance with an FHA cash-out refinance mortgage
  • Home Buyers who had a prior loan modification can now qualify for an FHA Loan after 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

In this article, we will discuss and cover HUD Guidelines after a loan modification to qualify for FHA loans.

FHA Guidelines On Mortgage After Loan Modification And Credit Requirements

FHA Guidelines On Mortgage After Loan Modification

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 the mortgage payments they currently have.

  • 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

Requesting A 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 home, no matter how much equity they have
  • To qualify for a loan modification, homeowners need to be employed
  • 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 mortgage company will thoroughly review financials and current mortgage status
  • The lender may decide 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

They may decide to put the amount behind on the back of the mortgage balance.

Types Of Repayment Plans

How to ask for a loan modification and foreclosure

The lender can lower mortgage payments and mortgage interest payments and extend the term of the loan:

  • Or they may decide to forgive part of the mortgage balance:
  • Forgiveness may include the amount borrowers are in arrears and reduce the mortgage interest rate so the monthly payments will be affordable
  • Whatever the case, once the lender grants a mortgage loan modification, homeowners can decide to sell anytime and qualify for FHA Loan after 12 months
  • There is a one year mandatory waiting period after a loan modification to qualify for FHA Home Loans
  • Borrowers need to 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

I get so many phone calls by mortgage borrowers who have trouble qualifying for FHA Loan after loan modification due to the mortgage lender overlays.

  • As mentioned earlier, FHA requires a one year mandatory waiting period to qualify for an FHA Loan after loan modification
  • Borrowers need to have been timely with all of their payments in the past twelve months after the loan modification
  • However, many mortgage lenders have their own 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.

Qualifying For FHA Loan With Direct Lender With No Overlays

Borrowers Who Have Problems Getting Mortgage After Loan ModificationBorrowers 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 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. We have no mortgage lender overlays on FHA Loans after loan modification. Gustan Cho Associates Mortgage Group 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.

10 Comments
  1. David & Betty McCormick says

    We are currently going thru Chapter 7 Bankruptcy process and expect a discharge within the next 4-5 weeks, (mid December). We are one payment behind on our mortgage and do not have a way to catch up with monthly payments or with a sum of total owed. We are both retired state employees drawing pensions and social security for our total income. Both are medically impaired in many ways and cannot obtain a substantial job in our rural. We have affirmed to the Chapter 7 Judge we will keep the home and continue monthly payments.

    When we are discharged and in Chapter 7 process, would we qualify for an FHA Loan modification program to catch up one payment, reduce the future monthly payments, lower the interest rate and extend the mortgage payoff amount, to be repaid at end end of the mortgage period or at payoff if or when the property is sold?

    1. Gustan Cho, NMLS 873293 says

      If you have a late mortgage payment, there is a two year waiting period after the last late payment on manual underwriting.

  2. T. Brown says

    Hello! In June 2017 I was discharged from a Chapter 7 bankruptcy. Then in January 2019 I entered into a loan modification program with my lender. I am looking to relocate and would like to purchase a new home using the FHA program. What is the probability that I will be able to make such a purchase in the next 3 months?

    1. Gustan Cho, NMLS 873293 says

      If you had your mortgage included in your bankruptcy and did the loan modification, there is a one year waiting period after the loan modification. You need timely payments on your mortgage for the past 12 months to qualify.

  3. Eve says

    My sister in law missed 12 months payment in mortgage BOA modified their loan last 2015 to reduce monthly payment but added $86000 in the loan.Now can they refinance to reduced the interset rate & monthly of course.Was the missed payments forgivable?..thank you.

    1. Gustan Cho, NMLS 873293 says

      Please contact us at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. If the modification paperwork said it is forgiven, then you should be fine.

  4. Shameem a Majumder says

    I have a mortgage with my private lender, they waived 3 months payments for forberance period. then started payment from July’20 and but almost month late for half of Aug’20 payment as supposed to close refinance by Aug 15, 2020. Now refinancing bank is saying i am late for Aug’20 payment, so i have to wait another 3 months to get refinance as per Fannie Mae guidelines. is any other option availavle for me to get quick refinance. thanks

    1. Gustan Cho, NMLS 873293 says

      Per the CARES ACT forbearance guidelines, homeowners can qualify for a home mortgage after three payments after the forbearance ended. You cannot make the three month’s payment in advance. It needs to season for at least three months.

  5. EDNA ALEXANDER says

    My son was trying to refinance his mortgage through FHA, he had a forbearance which ended in December but the mortgage lender said that they could not refinance his loan because of a loan modification. My son’s current mortgage company modified his loan without his consent, he did not have an escrow account and they modified his loan to have an escrow account. He was behind on his taxes and I assumed this is why they modified his loan but was still without his knowledge or consent.

    1. Gustan Cho, NMLS 873293 says

      On FHA loans, you need to wait at least one year after a loan modification to qualify for another FHA loan.

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