How long after 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.

Does a loan modification hurt your credit score?

A loan modification can result in an initial drop in your credit score, but at the same time, it’s going to have a far less negative impact than a foreclosure, bankruptcy or a string of late payments. If it shows up as not fulfilling the original terms of your loan, that can have a negative effect on your credit.

Can you sell your home with a loan modification?

Before you decide to sell your home through the HAFA federal loan modification program, you should talk to a qualified legal expert. She will help you determine if you should get mortgage forbearance, loan modification or attempt to sell your home through a short sale.

When does a home loan modification take effect?

If you remain in good standing, the principal reduction takes permanent effect after three years, and thereafter you do not have to repay the forgiven portion of the debt. You do have to repay the forgiven portion of the debt if you sell your home within three years of the modification.

How do I apply for a loan modification?

To apply for a loan modification, you’ll be asked to submit documentation to prove your situation. It’s up to the lender which type of modification they agree to make on your mortgage if they determine you’re eligible for the loan modification. Permanent loan modifications last for the life of the loan.

Is there a penalty for a loan modification?

However, there may be a prepayment penalty attached to the loan modification. A prepayment penalty is a provision in your contract with the lender that states that if you pay off the loan early, you’ll pay a penalty. A prepayment penalty can be expressed as a percentage of the principal balance or a specified number of months interest.

Can a home be sold after a modification?

Borrowers Can Sell After Modification. A modification is usually the preferred method of dealing with mortgage delinquency. A lender runs the numbers, including borrower income, assets, expenses and property value, to determine whether the lender is better off modifying the loan, allowing a sale of the home, or foreclosing on the loan.

How long does it take to sell a loan modification?

Generally speaking, traditional loan modification programs make it difficult for you to sell your home. This is because the loan modification process typically takes 3-6 months, which may be followed by a 3-6 month trial process in which you will need to make your payments.

How does a loan modification work on a home loan?

The most common modification scenario is for a borrower to lower his interest rate several years into a mortgage term. When a lender agrees to modify a loan, the borrower signs a loan modification agreement. This document outlines all the changes to the mortgage — most often the interest rate and the monthly payment.

When do you have to pay back a mortgage modification?

Depending on the type of loan modification you received, you may have to repay the original loan balance if you sell within three years. A mortgage modification permanently changes loan terms to reduce the monthly payment or otherwise make the loan feasible for a borrower in financial hardship.