FHA Mortgage Loan Modification Requirements And Guidelines
This BLOG On Loan Modification Requirements Illinois Was UPDATED On June 19th, 2019
Loan Modification Requirements:
- For a homeowner to qualify for an FHA loan modification, the mortgage loan currently have on a borrower’s current home needs to be owned by a Federal Housing Administration lender
- The loan itself is not an FHA loan because FHA does not make mortgage loans
- FHA simply insures the mortgage loan against default to the lender
Loan Modification Requirements Defined
- The Federal Housing Administration contacts the lender and will cover the financial loss that the mortgage has incurred due to the modification since the lender is insured by FHA
- There are certain requirements for a borrower to qualify for an FHA loan modification
- The mortgage loan must be an owner-occupied residential first mortgage
- The mortgage loan should be taken out before January 1, 2009
- The homeowner must show proof of financial hardship such as job loss
- The homeowner needs to be currently employed and in most cases have reasonable debt to income ratios
Loan Modification Requirements?
- The mortgage lender will send the borrower an FHA loan modification package
- The packet contains documentation that needs to be completed by the borrower and co-borrower if any.
- They will be asking for income and asset information such as tax returns, W2s, bank statements, and other documentation in order to process the FHA loan modification
- Included in the documents will be the request for modification and affidavit form, the IRS Form 4506-T request for a transcript of tax return, and the Hardship Affidavit
- Once the lender receives these documents, the lender will probably implement a three-month conditional trial FHA loan modification to see if the borrower is able to handle it without too much financial stress
- If the three month trial period proves to be within the borrower’s comfort zone, the mortgage loan is officially modified
- An FHA loan modification new mortgage loan is signed by the borrowers, co-borrower, and the lender.