FHA Mortgage After Loan Modification
This BLOG On What Are The Qualification Requirements For FHA Mortgage After Loan Modification Was Written By Gustan Cho NMLS 873293
The real estate market crash of 2008 created major impacts on homeowners who had teaser rate mortgage loans where they initially had very low rates and once their adjustment periods were over, the new housing payment doubled and sometimes tripled where homeowners could no longer offered their new adjusted mortgage payments. Home buyers can now qualify for FHA Mortgage After Loan Modification in 12 months after the modification:
- These mortgage loans were often called negative amortization mortgage loans.
- Bankruptcies and foreclosures have sky rocketed at all time historical levels as well as deed in lieu of foreclosures and short sales.
- Starting in 2009, modifications became extremely popular where homeowners who had upside down mortgages or mortgage loan payments where they could no longer afford due to job loss, business loss, or underemployment still wanted to keep their home but could not afford their current mortgage loan payments.
- Homeowners contacted their mortgage loan servicers and requested a mortgage modification.
- A loan modification is where the mortgage lender restructures the current mortgage loan the mortgage loan borrower has and reduces the mortgage payment by offering a lower interest rate and/or discounting the balance of the mortgage loan to avoid foreclosure.
- It can take months to process and finalize a modification and the current mortgage lender needs to review and audit the mortgage loan borrower’s financials and the mortgage lender needs to feel confident that the mortgage loan borrower is able to afford the new modified mortgage loan payment.
- Hundreds of thousands of homeowners went through a workout of their original mortgages starting in 2009 and now.
- Many homeowners who went through restructuring the home loans are now stable and have made timely payments and are thinking of buying a new home and/or refinancing their current mortgage loan.
- Like bankruptcy and foreclosure, there is waiting period after loan modification per Fannie Mae and HUD mortgage lending guidelines.
- However, just because you have passed the waiting period does not mean that you will qualify for a new mortgage after waiting out the waiting period.
- I have gotten dozens of calls from potential home buyers who had a prior modification and went to a mortgage lender and were told that there is a 4 year waiting period to qualify for a new mortgage.
- Each mortgage lender have investor overlays when it comes to waiting period after loan modification.
- If you are looking for a mortgage lender with no investor overlays after a modification, please contact me at 262-716-8151 or visit me at www.gustancho.com and I may be able to help you.
How Are Modifications Done?
A mortgage loan is modified when your mortgage lender restructures the terms and conditions of your current mortgage loan without refinancing the current mortgage loan.
- The loan is restructured and modified by the current mortgage company who is servicing your mortgage loan and no appraisal is required unless your home is severely underwater, which means your mortgage is higher than the value of your home, to determine whether or not the current mortgage lender will discount the balance of your current mortgage loan.
- A mortgage loan is modified by one of several methods:
- When the current mortgage lender reduces your current mortgage rate to a lower rate to decrease your monthly payment, by increasing the term of your current mortgage loan to a longer term so your monthly payments are reduced, by converting to a fixed rate mortgage loan
- or by discounting the overall balance of your mortgage loan so the balance is lowered which reduces your monthly mortgage payment.
Qualifying For FHA Mortgage
If your current mortgage loan was modified via getting a lower interest rate or if your current mortgage loan was switched to a fixed rate mortgage loan rate from an adjustable rate mortgage ( ARM ), there is no waiting period after loan modification.
- However, if your current mortgage lender has discounted your current mortgage loan balance, the mandatory waiting period after loan modification is 12 months from the effective date of the loan modification with a 12 months on time payment history which is reflected on your credit report.
- If your current mortgage lender has extended the term of your mortgage loan to reduce your new mortgage payment, there is a mandatory one year waiting period and 12 months of on time mortgage payments that is reflected on the credit bureaus.
- Most homeowners who just had a interest rate reduction with no reduction of their mortgage loan balance or extension of the term of the current loan will not have a waiting period after your mortgage has been modified.
Purpose For Modifying Your Mortgage
Mortgage lenders offer to modify your existing mortgage to avoid foreclosure and work with homeowners who wanted to still keep their home.
- Candidates are homeowners who have been victims of the 2008 real estate and credit meltdown, those who lost their jobs.
- Those who lost their business, those who went through divorce, those who had medical issues.
- Those who had negative amortization mortgage loans, those with sub-prime mortgage loans, those with prior teaser interest rate mortgage loans, and those who had extenuating circumstances.
General Requirements For FHA Mortgage After Modification
As mentioned earlier, I offer no mortgage lender overlays on mortgage loan approvals after a mortgage loan modification. Generally, we need twelve months timely payments after a loan modification and no late payments after the date your existing mortgage has been modified. If you are told by a bank, credit union, or other mortgage company that you do not qualify for at least three or more years after a mortgage modification, that is because they have mortgage lender overlays which is additional guidelines above and beyond the minimum Fannie Mae and/or HUD lending guidelines. If you had a prior loan modification and need a mortgage lender with no mortgage lender overlays, please contact me at 262-716-8151 or email us at email@example.com.