John Vitela: How Long After Loan Modification Can I Buy A House?

In most cases, you can get a mortgage to buy another house after a loan modification as long as you haven’t missed any payments over the previous 12 months, depending on the specifications of your lender. But you need to know how your original loan was modified. If you had any principal balance forgiveness or write-down on your mortgage, you may not qualify for a conventional mortgage loan. But there are other ways to get a mortgage with a low credit score. To a degree, it depends on the kind of modification plan you are in. If you are in a private modification, you should contact your servicer when you suspect that you will be having trouble making payments the sooner the better. Negotiating a new modification may or may not be possible; please know that the servicer’s role is to try to negotiate the most favorable outcome for the owner of the loan, and is not under any legal obligation to offer you new terms and conditions.

However, they do need to review your situation and provide clear information about your rights and any appropriate timelines. If you’re in an old FHA-HAMP, that program is still active and you may be able to get a new modification after a trial payment plan period has been successfully completed. The old HAMP program (discontinued 12/31/2016) has been replaced by a new Flex Modification program. According to it is noted that borrowers who previously modified their loan through HAMP (or any of the predecessor programs) are eligible for a Flex Modification if the mortgage loan meets all of the eligibility requirements for the Flex Modification Program (including but not limited to the following):

• The mortgage loan must be delinquent or in imminent default

• The mortgage loan must not have been modified three or more times, regardless of the loan modification program

• The mortgage loan must not have received a Flex Modification and become 60 days or more delinquent within 12 months of the modification effective date without being reinstated.

• The borrower must not have failed a Flex Modification Trial Period Plan within 12 months of being evaluated for eligibility for another Flex Modification.

To get started, you’ll want to contact the servicer of your loan. Look on your mortgage statement for contact phone numbers or website locations; some may have special numbers or site locations for borrowers having trouble with their loans. Talk to them as soon as you can and see what relief they might be able to offer you. You can get a mortgage after you have done a loan modification. Loan modifications were quite popular starting in 2009 through 2013. You are not seeing nearly as many since the beginning of 2014. Depending on what you did to your loan when you modified it depends on how long you have to wait if at all, after the loan was modified. A loan modification is when you change your current mortgage without refinancing it. A loan modification is usually done by the current company who is servicing the loan.

A loan (mortgage) is considered modified if any of the following have occurred: lowering of the interest rate, increasing the term of the loan, converting to a fixed rate or reducing the balance of the mortgage. All of these modifications will result in a lower payment. If you went ahead a only lowered the interest rate or converted it to a fixed rate, than you should be able to qualify for a new mortgage right away, no waiting period. If you reduced the balance of the loan than you will have to wait at least 1 yr possibly more. Increasing the term of your loan will also result in at least 1 yr possibly more. The good news is most loan modifications that were done only adjusted the rate. Loan modifications were done to try to help people stay in their current homes. The person could have had a loss of income or a job loss. Maybe they could not afford the mortgage payment after it had adjusted, sometimes as much as 7% higher. Then there were customers who were just mad that their value had dropped. If you are going to apply for an FHA or VA loan then most lenders are going to require a minimum of 3 yrs. after your loan modification was completed. There are a couple of lenders that will allow anywhere from 1-2 yrs after a loan modification is completed.

The loan modification must be complete. It cannot be in a trial phase and there must be a new note. If you have late on your new modified mortgage, almost all lenders will require a 12 month waiting period from the date of the last late. A lot of lenders also look for perfect credit after a loan modification. If you had a loan modification you can buy a new home or refinance your existing home. One of the challenges many homeowners faced in the recession was financial hardships. Loan modifications were often a short term solutions banks used for homeowners facing delinquency, income changes, or loss of home-equity. Each loan modification was different, but the most common form of loan modification involved simply a reduction in the mortgage payment.

General conventional mortgage loan guidelines require you to have 24 months of payment history on the subject property you’re looking to refinance since the date of the modification or 12 months of payment history if you trying to finance the non-subject property. Put another way, if you had a loan modification on a house 12 months ago, but are looking to finance another property, you should be in the clear. The subject property is the property in question that you’re looking to get a new mortgage on. If you have had principal balance forgiveness, also called a write-down, you are going to be ineligible for most conventional mortgage loans. If you’re loan payment was reduced only and you have the 12 months or 24 months payments rating you’re eligible for financing. The mortgage holder that did the modification will typically report ‘restructured or modified mortgage‘on your credit report. In the event you have a modified mortgage, but the credit report does not indicate so, this could be a golden ticket. Lenders work off the credit report. You will need to provide a copy of the original modification terms specifically detailing the modification if you have a modification in your past. Some lenders who have provided loan modifications to borrowers have different interpretations of what Fannie Mae and Freddie Mac consider to be a modified or restructured mortgage. This is something that can work in your favor. Most, but not all loan modification involved you signing new paperwork detailing the specifics of your loan restructuring with your mortgage loan servicer.

If your loan was changed, but you did not sign any paper work, you’re loan may report normally to the credit bureaus wherein documenting the loan modification need not be necessary, nor would you be subject to the waiting times. Most banks that originate, bundle and sell loans to the secondary market operate off the same guidelines regarding waiting times. In many situations bigger banks have what are called investor overlays that add another layer of scrutiny to a loan that may not necessarily need it, but are place to insure less risky loans. If you’ve been turned down before based on the previous loan modification situation you owe to yourself to obtain a second opinion. Mortgage banks that deal directly with Fannie Mae and Freddie Mac may be more viable source for securing a loan than a bank whose credit guidelines are in place to benefit shareholders rather than consumers actually borrowing the money.

Understanding Home Equity Loans and Credit Lines

Home equity loans can be an affordable way to tap the equity in your house to use for home improvements, pay for education and pay off credit cards or other types of debt. They are considered second mortgages because they are secured by your property and typically have lower interest rates than non-secured loans. Formerly, the interest paid on these loans, used for personal items, was tax deductible. However, with the advent of the Tax Cuts and Jobs Act, the interest will only be deductible if the loans “are used to buy, build or substantially improve the taxpayer’s home that secures the loan,” as stated by the Internal Revenue Service.

Two Loan Types

• Home Equity Loans

• Home equity line of credit (HELOCs)

There are two types of home equity loans. The first is a loan of a set amount of money financed for a set period (usually five to 15 years) at a fixed interest rate and with a fixed payment. The second type is called a home equity line of credit (HELOC).

A HELOC has a variable interest rate and functions more like a credit card with an expiration date (often up to 10 years after the line of credit is taken out). You can run into trouble with either type of home equity debt if you have serious financial problems, lose your job or experience an unexpected illness. A further complication of a HELOC is the stark contrast between the initial phase (“draw” period), when you have access to the line of credit and may have to pay only interest on the money you borrow, and the second (much more costly) “repayment” phase, when the line of credit expires and you must begin repaying both principal and interest on your remaining balance.

Defaulting on a home equity loan or line of credit could result in a foreclosure. What the home equity lender actually does depends on the value of your home. If you have equity in your home, your lender will likely initiate foreclosure, because it has a decent chance of recovering some of its money after the first mortgage is paid off. The more equity, the more likely your second mortgage lender will choose to foreclose. If you are underwater (your home is worth less than the combined amount owned on both the first and second mortgages), your home equity lender may be less likely to foreclose. That’s because the first mortgage has priority, meaning that it’s likely that the second mortgage holder will not receive any money after a foreclosure. Instead, the second mortgage holder will choose to sue you personally for the money you owe. While a lawsuit may seem less scary than foreclosure proceedings, it can still hurt your credit, and lenders can garnish wages, try to repossess other property or levy your bank accounts to get what is owed. Most mortgage lenders and banks don’t want you to default on your home equity loan or line of credit, so they will work with you if you are struggling to make payments. Should that happen, it’s important to contact your lender as soon as possible. The last thing you should do is try to duck the problem. Lenders may not be so willing to work with you if you have ignored their calls and letters offering help. When it comes to what the lender can do, there are a few options. Some lenders offer to modify your loan or line of credit. Bank of America, for example, will work with borrowers by offering to modify the terms, interest rate, monthly payments or some combination of the three to make the loan or HELOC more affordable. To qualify for Bank of America’s loan or HELOC modification, borrowers must meet certain qualifications:

• They must have had the loan for at least nine months.

• They must not have received any kind of home equity assistance in the last 12 months or twice in the last five years.

• They must be undergoing financial hardship.

• They must be able to repay the loan.

Other private lender which offers student loans work with a borrower who is struggling to meet payments by offering multiple deferments and forbearance options. Home equity loans and lines of credit can be an inexpensive way to tap the equity in your home. If you find yourself in trouble, you do have options. From lender workouts such as a loan modification to limited government help, there are ways to get out from under a home equity or HELOC problem without going into foreclosure. The key in all options is to get help right away instead of hoping the problem will disappear on its own.

Loan Modification Lawyer Free Consultation

When you are behind on your mortgage and you need legal help, please call Ascent Law LLC (801) 676-5506 for your Free Consultation. We can help you with real estate law. Mortgage Law. Loan Modifications. Bankruptcy. And Much More. We want to help you.