Qualifying For FHA Loan After Mortgage Forbearance

This BLOG On Qualifying For FHA Loan After Mortgage Forbearance Was UPDATED On June 1, 2017

There are times throughout your life that an emergency happens which causes financial hardship.

  • Events like job loss, divorce, death in the family, and natural disasters like hurricanes happen unexpectedly.
  • These events can affect income stream causing to be late on mortgage payments as well as you other bills.

Forbearance Versus Foreclosure

When a negative event happens in your life and you feel that your financial situation will change for the worse, please contact your mortgage lender and ask them for a temporary forbearance.

  • A forbearance is a temporary relief by a mortgage lender where the lender will work with the borrower in suspending the borrower’s regular scheduled payment until the borrower is back on his or her feet.

Example of Forbearance

For example, when Hurricane Sandy struck the eastern border of the United States last year, JP Morgan Chase and other banks developed a natural relief program for homeowners where they offered a 90 day forbearance until the affected homeowners recovered.

  • Many victims of Hurricane Sandy were temporary out of work because their employer were shut down due to the damage caused by the hurricane while others had their homes severely damaged. 
  • Homeowners who lived in other states besides the east coast were affected also because their employment headquarters were located on the eastern states affected by Hurricane Sandy. 
  • JP Morgan Chase and other mortgage lenders were extremely understanding and generous in offering a forbearance to those affected homeowners.
  • Mortgage payment history on borrowers credit report were not reported late.

Requirements For Mortgage Forbearance

One of the requirements of being granted a forbearance is that the homeowner be current with their mortgage payments when requesting for a forbearance.

  • If you are behind on your mortgage payments and request a forbearance, your forbearance request will not be granted. 
  • So if you anticipate any financial hardship and think you will be late with future mortgage payments, you need to contact your mortgage lender immediately and see what types of programs they have to offer. 
  • Mortgage lenders do not want your house. 
  • They want to work with homeowners and will do anything possible to work with them. 
  • Repayment plans can be adding the arrearage amount back to the loan amount or an extended payment plan. 
  • I strongly recommend to contact not just your mortgage lender, but contacting all of your creditors as well prior to being late. 
  • They will appreciate it and will be more willing to work with you.

Mortgage Forbearance Versus Loan Modification

A mortgage forbearance is when the lender gives the homeowner some time to get their finances together due to the following:

  • Loss of job
  • Medical reasons
  • Gap of employments
  • Divorce
  • Other extenuating circumstances

Mortgage forbearance normally are short term workouts on homeowner’s home loans where once the forbearance period is over, the homeowner can pay the amount in arrears all in one lump sum or make payments over a short period of time.

With loan modifications, the homeowner is not required to pay the amount in arrears because they do not have the means to catch up on their arrearage.

Here is how loan modifications are done:

  • Lenders will want to see the homeowner’s financials and the reason why they fell behind
  • The lender will come up with a reduction of the homeowner’s monthly P.I.T.I. 
  • The reduction is normally done by the reduction of interest rates or extending the term of the home loan
  • There is normally a three month trial period and if the trial period is successful, the loan modification is finalized
  • The payments that are behind can either be forgiven, added to the back of the loan, or spread out for a certain period of time with a loan modification

Qualifying For FHA Loan After Mortgage Forbearance And Loan Modification

Home buyers can qualify for a FHA Loan After Loan Modification one year after the loan modification and need to provide  the lender with 12 months of timely payments.

  • Home buyers can qualify for a FHA Loan with no waiting period after a mortgage forbearance but most mortgage lenders want to see 12 months of timely payments.
  • Mortgage borrowers can qualify for FHA Loan with prior mortgage late payments but most lenders want to see timely mortgage payments in past 12 months.
  • Many lenders will not accept borrowers who had a 120 day late payments on mortgage because they consider this a pre-foreclosure even though foreclosure proceedings were not initiated.
  • This is not a HUD Guidelines but a lender overlay.

Borrowers who had 120 days late payments on their mortgage payment history but has been current the past 12 months and are denied a FHA Loan because they are told that is a pre-foreclosure can contact Gustan Cho at 800-900-8569 or text Gustan Cho at 262-716-8151 or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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