Obtaining a mortgage after a home modification

[Ineedaname]

Hello all,

I am selling my home to downsize.  4 years ago I had the loan modified due to divorce and the economic downturn.  Since then I've been working hard to improve my credit and get on my feet.

I want to downsize my home as my kids are moving on and I really don't need a home that is big.  With my credit score, I was told that FHA was the only loan I could get.  I've resigned myself to the fact that I'll have to pay PMI.  Renting is not an option in my area and I want to keep my son in the same school.

Anyway, the mortgage broker said that I do not qualify for an FHA loan until I've been out of modification for a year.  I've never heard of that and am wondering if it is the case or if I should shop around more. 

Any insight would be helpful as I have a fear of my home selling and me being out on the street. 

[pm11222]

I would think that just means that you wouldn't qualify until a year post-modification.  You won't be "out of loan modification" ever, as the loan is permanently modified already, which just means that a modification agreement was entered into with terms of the loan changing

[Ineedaname]

hello.  Thank you for your response.  That is exactly what the broker told me but I'm wondering if that's true with everyone or just that particular lender? 

Does anyone know the true answer?

[pm11222]

 I guess why I'm confused and thought that's not what you were asking is because you say you modified your loan 4 years ago but now don't qualify because you have to be out of modification for one year, so I thought you meant something different because aren't you already 1 year post modification?

[ShanetheMortgageMan]

I'm confused too... was it modified 4 years ago or just 1?  Normally lenders require you to be 12 months into a permanent loan modification, but technically FHA doesn't have a written guideline on it.

[Ineedaname]

The loan was modified 4 years ago.  The broker told me that I had to be out of the modifcation for 1 year in order to qualify for a new mortgage.  Basically he's telling me that I have to sell my home, and wait for one year in order to qualify for a mortgage.  It's very frustrating to get so many different answers to things . . . .

[StartingOver10]

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@Ineedaname wrote:

The loan was modified 4 years ago.  The broker told me that I had to be out of the modifcation for 1 year in order to qualify for a new mortgage.  Basically he's telling me that I have to sell my home, and wait for one year in order to qualify for a mortgage.  It's very frustrating to get so many different answers to things . . . .

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^^^This means that the particular broker you went to has this requirement.

It seems confusing because it is confusing. There are as many different answers to the question as there are lenders.  To simplify a little: there are guidelines from Fannie Mae, Freddie Mac and HUD depending upon the type of loan you are getting (conventional or government). Plus each lender can add their own restrictions to the loan (lender overlays).  Plus a lender can change its overlays at any time by increasing restrictions or reducing restrictions. Some lenders have no overlays or very few overlays. Others have many.

So, in general a lender will qualify you for the loan one year into the modification (without you having to sell the house). But the lender you are working with has additional restrictions. If it were me with your situation, I would find another lender.

[Ineedaname]

Thank you for your reply.  I am thinking I may end up renting for a while so I can pay down some debt and increase my credit score. 

[ShanetheMortgageMan]

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@Ineedaname wrote:

The loan was modified 4 years ago.  The broker told me that I had to be out of the modifcation for 1 year in order to qualify for a new mortgage.  Basically he's telling me that I have to sell my home, and wait for one year in order to qualify for a mortgage.  It's very frustrating to get so many different answers to things . . . .

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You should be fine if the loan mod was 4 years ago.  The mortgage broker may not be approved with many lenders, so the few he has may have very restrictive requirements.  I'd say you should check around with other loan officers, as 12 months into a permanent loan modification is a common waiting period requirement... and you are 3 years past that it sounds.