FHA Loan After Modification Mortgage Lending Guidelines

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FHA Loan After Modification Mortgage Lending Guidelines

This BLOG On FHA Loan After Modification Mortgage Lending Guidelines Was UPDATED On September 21st, 2018

What are FHA Loan After Modification Mortgage Lending Guidelines

Qualifying For FHA Loan After Modification

Can you qualify for FHA Loan After Modification?

  • The answer to the question in qualifying for FHA Loan After Modification is yes
  • However there are certain HUD Guidelines in qualifying for FHA Loan After Modification with regards to credit and mandatory waiting period requirements
  • A home loan modification is when a homeowners needed to modify their mortgage loan with the help of their lender to lessen their monthly housing payment
  • Lower monthly payment is needed due to having a reduction in income where homeowners can no longer afford their current monthly mortgage payments
  • A mortgage loan modification is granted by a lender to avoid foreclosure 
  • However, the lender will need to do a full review of borrower’s financial and see how stable the borrower’s income is
  • Lender will determine whether or not the borrower is able to afford a certain amount of monthly payment
  • Before granting a loan modification, lender will not want borrower to encounter financial difficulties after the home loan modification has been finalized and a new payment has been agreed upon
  • Loan modifications do take some time
  • Lenders will want to see borrower is employed and the stability of their employment
  • The following will be requested:
    • 30 days of paycheck stubs is required
    • borrower’s monthly housing expenses such as utilities
    • car payments
    • minimum credit card payments
    • other expenses need to be provided to lender
  • The lender will then calculate the maximum housing allowance borrower can afford
  • Lender will see how they can restructure the current home loan so the borrower will able to afford their mortgage payments

How Loan Modifications Work

Mortgage lenders are in the business of originating, funding, and servicing home loans.

  • They are not in the business of real estate investments
  • Even though the property is used as collateral, lenders want to avoid  foreclosing on the property at all available costs
  • Loan modifications is one alternative to foreclosure
  • There are several ways to structure loan modifications
  • There are many reasons why homeowners could have afforded their mortgage payments but can no longer afford their home loan payments due to extenuating circumstances
  • Examples of reasons why families have reduction in income include the following:
    • business loss
    • job loss
    • divorce
    • health reasons
    • death in the family

Most folks who seek a home loan modification are normally behind on their mortgage payments.

  • One type of loan modification are the following:
    • Mortgage Lenders can forgive the mortgage balance that are in arrears
    • Keep the mortgage payments the same
    • If borrower lost his or her job and gets a new job making the same amount of money, they can keep up with same mortgage payment
    • They can easily afford the current monthly mortgage payments
    • But cannot come up with balance in arrears so lender can either forgive the arreage or tack it on the back of the loan
  • Second option the mortgage lender can offer a homeowner in modifying their home loan is to keep the monthly mortgage payments the same
  • But add the balance that is in arrears to the back of the mortgage loan
  • Third option lenders can offer is reducing borrower’s interest rates to lower the monthly minimum mortgage payments where the new payment will make it affordable to the homeowner
  • A fourth option mortgage companies can offer is discounting loan balance
  • And/or lowering the mortgage interest rate to adjust the monthly principal and interest payments where the mortgage borrower can afford it

Either way, lenders will try to find creative solutions in helping a homeowner with modifying their home loans so they can avoid foreclosing on their property.

When Can I Get FHA Loan After Modification?

When Can I Get FHA Loan After Modification?

Home buyers can qualify for FHA Loan After Modification.

  • FHA Loans are for owner occupied primary properties only and not for second homes, vacation homes, and investment homes
  • FHA Guidelines in qualifying for FHA Loan After Modification require that the home buyer need to wait one year from the date of loan modification
  • Need to show that 12 months of timely payments have been made
  • Cannot have any 30 day late payments after loan modification to qualify for FHA Loan After Modification

Mortgage lenders will also want to see that the mortgage loan borrower has made timely payments on all of his or her credit obligations after the loan modification.

Why Am I Told Different Waiting Periods To Qualify For FHA Loan After Modification

Why Am I Told Different Waiting Periods To Qualify For FHA Loan After Modification

Borrowers who had a mortgage loan modification and want to sell their home they had the loan modification done and buy another house and were told they do not qualify until two to four years after their loan modification contact us. If you consulted with lender with waiting period overlays after loan modification please contact Gustan Cho Associates at Loan Cabin Inc. We have zero overlays on government and conventional loans. FHA Guidelines to qualify for FHA Loan After Modification clearly states borrowers can qualify for a FHA Loan one year after loan modification. However, most lenders will require a four year wait period after loan modification on FHA Loans. If you were denied for a FHA Loan After Modification for not meeting lender’s requirements, contact us at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates at Loan Cabin Inc. are direct lenders with no overlays on FHA Loans, Conventional Loans, VA Loans, and USDA Loans. We just follow just the federal lending guidelines. We are available 7 days a week, evenings, weekends, and holidays to take your calls and answer all of your questions.

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