Is it possible to refinance after you get a loan modification?
Homeowners go through the process of a loan modification to stay afloat in times that their mortgage payments are becoming too difficult to maintain. It is possible to refinance the loan again in the future, but do not expect it to come without challenges. Although the temporary financial hardships have been overcome, any missed payments probably did some major damage to credit scores.
Modified Mortgage Refinancing
The Federal Housing Authority oversees the actions of certain lenders and provides insurance to entities that allow homeowners to refinance their mortgages. When a property owner decides to refinance down the line, they are sacrificing the lower rate and monthly payments made possible by the FHA. Always consider the reason for the past hardships to decide if it is a truly smart move to restructure the modification.
Working with the Original Lender
Most people find it the easiest option to refinance a mortgage through the same lender that they have been working with throughout the entire process. This might actually be more difficult when trying to meet the qualification terms, especially if a significant amount of time has not passed since the modification. Specific conditions and stipulations, such as a reduction of the total loan balance, make it almost impossible to gain eligibility to refinance with the original lender.
Finding a Different Lender
Failure to qualify with one mortgage lender does not necessarily mean that it’s the end of the road. As long as the home value is greater than the remaining loan balance and the mortgage is current, it may be possible to get a decent refinance rate through another broker or lender. Do not act too quickly after recovering from past problems, even if you can prove a significant income increase, because it takes time to bring a credit score back up to an acceptable level.
There are other less attractive options for financing when no lender is willing to refinance. Hard Money Lenders are always willing to take on new clients in exchange for hefty rates and fees. It might be smarter to simply stay within the modified mortgage terms until conditions for a reputable lender are sufficiently met. Schedule an appointment with the experts at The Law Offices of Georgette Miller and Associates when you are in need of personal financial advice.