FHA Mortgage Loan Modification Requirements And Guidelines


This BLOG On Loan Modification Requirements Illinois Was UPDATED On June 19th, 2019

Loan Modification Requirements:

Homeowners who have trouble making their mortgage payments due to job loss, divorce, or due to other unusual financial setbacks, they might want to consider an FHA loan modification:
  • 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

Loan Modification is the reduction of the mortgage rate and installment payment per month and increasing the longevity of the mortgage loan.
  • 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?

To see whether you are qualified for an FHA loan modification, contact your mortgage lender.
  • 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.
An FHA loan modification is a great program that can help homeowners who need help due to a job loss or other financial setbacks and can help homeowners avoid bankruptcy and/or foreclosure. Borrowers can qualify for an FHA Loan one year after a loan modification. Timely payments on all monthly debt payments in the past 12 months are necessary.  For more information on this blog or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com.

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