Getting a Mortgage After a Loan Modification
A loan modification is a change to the original terms of a mortgage. It can involve lowering the interest rate, increasing the loan term, converting to a fixed rate, or reducing the balance of the mortgage. If you have had a loan modification, you may be wondering if you can get a new mortgage.
Waiting Period
Generally, conventional mortgage loan guidelines require a waiting period of 24 months of payment history on the subject property since the date of the modification. However, if you are trying to finance a non-subject property, a 12-month payment history may be sufficient (Credit.com, 2016).
Types of Modifications
The type of loan modification you did will determine the waiting period for getting a new mortgage. If you only lowered the interest rate or converted it to a fixed rate, you may be able to qualify for a new mortgage right away. However, if you reduced the balance of the loan or increased the term, you will likely have to wait at least 1 year, possibly more (Barclay Butler Financial, 2023).
FHA and VA Loans
If you are applying for an FHA or VA loan, most lenders will require a minimum of 3 years to have passed since the loan modification was completed. However, there are a few lenders that may allow a waiting period of 1-2 years (Credit.com, 2016).
Conventional Loans
For conventional loans (Fannie Mae or Freddie Mac), most lenders require a waiting period of 1-3 years after a loan modification. However, some lenders, like Barclay Butler Financial, may have no minimum time frame requirement after a loan modification is complete (Barclay Butler Financial, 2023).
Credit Score
Lenders typically require a minimum credit score for mortgage approval. For conventional loans, a credit score of at least 620 is usually required after a loan modification (Barclay Butler Financial, 2023).
Conclusion
If you have had a loan modification, it is possible to get a new mortgage. However, there may be a waiting period involved, depending on the type of modification you had and the lender you are applying with. It is important to shop around and compare interest rates from multiple lenders to find the best deal.
References
- Credit.com. (2016, April 26). How to Get a Mortgage After a Loan Modification. https://www.credit.com/blog/how-to-get-a-mortgage-after-a-loan-modification-142495/
- Rocket Mortgage. (n.d.). Loan Modification Vs. Refinance. https://www.rocketmortgage.com/learn/loan-modification-vs-refinance
- Barclay Butler Financial Inc. (2023, March 14). Can you get a home loan after you did a loan modification or mortgage modification. https://www.barclaybutlerfinancial.com/can-you-get-a-home-loan-after-you-did-a-loan-modification-or-mortgage-modification-2/
FAQs
How long do I have to wait after a loan modification to get a new mortgage?
The waiting period depends on the type of loan modification you had and the lender you are applying with. Generally, you will need to wait at least 1 year, and possibly more, after a loan modification before you can get a new mortgage.
What types of loan modifications affect my ability to get a new mortgage?
Loan modifications that reduce the balance of the loan or increase the term will typically result in a longer waiting period before you can get a new mortgage.
Can I get a new mortgage if I had a principal balance forgiveness?
It is unlikely that you will be eligible for most conventional mortgage loans if you had a principal balance forgiveness.
What credit score do I need to get a mortgage after a loan modification?
Lenders typically require a minimum credit score of 620 for conventional loans after a loan modification.
Can I get a VA loan after a loan modification?
Yes, you can get a VA loan after a loan modification, but you will likely have to wait at least 3 years after the modification was completed.
Can I get an FHA loan after a loan modification?
Yes, you can get an FHA loan after a loan modification, but you will likely have to wait at least 3 years after the modification was completed.
What if I have late payments on my new mortgage after a loan modification?
If you have late payments on your new mortgage after a loan modification, most lenders will require a 12-month waiting period from the date of the last late payment.
Can I get a mortgage with a co-signer after a loan modification?
Yes, you may be able to get a mortgage with a co-signer after a loan modification, but it will depend on the lender’s requirements and the co-signer’s creditworthiness.