FHA Guidelines on Mortgage After Loan Modification

FHA Guidelines on Mortgage After Loan Modification

Gustan Cho Associates are mortgage brokers licensed in 48 states

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

FHA Guidelines on Mortgage After Loan Modification 2

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

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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)

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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

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

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

  6. Hey Gina, I appreciate that you pointed out that in cases like divorce, couples often seek FHA mortgage loan modifications. The other day my friend mentioned that he is planning to separate from his wife. I will definitely recommend him to have his mortgage reviewed to ensure that he does not lose it.

  7. Hello
    I have a FHA Loan Modification as of 3/2019 and I am looking to purchase a conventional loan this year 2021. Is there a waiting period?

    1. There is a one-year waiting period after a loan modification to qualify for an FHA loan. There is a four year waitng period to qualify for a conventional loan after a loan modification.

  8. We are try to refinance our mortgage, we had a loan modification in 2012 and in June of 2020. Do we qualify for an FHA loan?

    1. Was the loan modification under the CARES ACT? If so, you qualify. If it was a regular loan modification, then you need 12 timely payments after the modification for you to qualify. What state are you in? Please reach out to us with your contact information.

  9. We are currently going through a modification. Just completed our third trial payment, as of Aug 1, and sent the final docs. We want to sell immediate after the mod becomes permanent. We also want to purchase again. Will we qualify for an FHA loan immediately or will we have to wait 12 months after selling the home?

    1. You do not have to wait after the modification is over if you had been timely in the past 12 months. If not, you need timely payments in the past 12 months. Please reach out to us with your contact information so we can help you get qualified for a mortgage.

  10. We were approved for FHA HAMP Modification as of April 23, 2021. The three trial payments were made timely and I continue to make timely payments. How long does the mortgage company have to provide new mortgage paperwork? They also have not applied any payments toward the outstanding mortgage balance as it continues to increase. Thank you.

  11. I had a modification on my FHA I continued to make my regular payments while the modification during the paperwork period. I never missed a payment and made it in full. I’m trying to sell my house and now there is a subordinate mortgage lien on my house, I can’t get any answers as to why?

  12. i did a loan modification 7 years ago . 50k was added to my loan balance as a result of the mod. I also did a forbearance during covid. I have unpaid interest of 12k. my payoff breaks this down. I am trying to refi now and the lender is telling me the 50k and 12k makes my FHA refi a cash out refinance Why? I am not getting any cash

  13. My mortgage servicer said my loan modification was a RECOVERY HAMP which was CARES Act guidance. My question is when can I apply for a new fha or conventional loan? Do I have a minimum waiting period? Thank you.

    1. If you are on a repayment plan, then there is a three-month waiting period. If you paid off the outstanding payments in full, there is no waiting period requirements.

  14. We had a modification in 2014 and we di miss some payments in the last 7 years. We have made all payments in the last 14 months on time can we get an FHA refi.

  15. I had a 3 month forbearance, followed by a modification. I shave made 12 payments on time and my score is 600. Can I do a cash out refi?

  16. I have second that misapplied my payment as principal and interest only payment which turn made my payments show late or missed. The sold the loan showing 17 missed payments. Completed a mod. But after I reviewed their ledger and my financial statement it showed discrepancies..notified new lender of the issues was informed today that its to far back to correct the mistake and that I am paid as agreed on credit report but still show those late payment that they waived all late fees. Want to buy another house using my VA benefit do I have to wait 12 month of on time payments.

  17. I have a 2nd Mortgage that is maturing and I need to modify the loan since I do not have the cash to pay off the loan in a lump sum. My credit score is above 700 and have never missed a payment on my 1st mortgage and 2nd mortgage in 20 years. I am fully employed and have a monthly income in which I can easily continue to make monthly payments. Should I be concerned that my my modification will be accepted?

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