Can You Refinance After A Loan Modification In Alabama?

Yes! You can refinance a modified home loan depending on your current financial situation, the terms of the modification and how much time passed since completing your loan modification. Usually, lenders don't approve loan modifications unless you stand a better chance of repaying the debt under the new modified terms.

If you are interested in selling your property quickly, we can help. Contact us today!

Have Your Income, Assets and Equity Improved?

If your loan modification was due to financial hardship such as divorce, high expenses, reduced income or another temporary financial setback, and you've recovered, your income and assets may have improved. There is a 12-24 month waiting period before you can refinance under most post-loan modification options.

To refinance a loan's interest rate and repayment terms, the refinance lender requires you to have a stable income and total monthly expenses within 40 percent of your gross monthly income. To cash out in a refinance, that is, to take some of your home's equity, your income may have to be higher and your home must have significant equity -- at least 25 percent, according to standard Fannie Mae eligibility guidelines.

Loan Modification Conditions

Loans that undergo a principal reduction, in which the lender reduces the overall loan balance to make the payments affordable, will usually not qualify for a refinance. Such modification agreements state that you have to repay the amount the lender writes off if you later refinance or sell the home. This protects the lender from unnecessary losses and keeps borrowers from pocketing the equity produced after a principal reduction. You're more likely to get a refinance if your loan modification entailed a temporarily or permanently reduced interest rate, a loan-term extension, or deferment, in which the lender tacked missed payments or interest on part of the principal balance to the back of the loan.

Missed Payments and Credit Hits

Loan modifications are often long and drawn out. The process involves proof of a hardship, and for many lenders, that means missed payments. If you missed payments in the months leading up to your modification, your credit took a hit. Your credit score dropped, likely by several hundred points, and your lender reported the modification to the credit bureaus.

Credit scores take time to recover from mortgage problems, usually about two years. A refinance requires no missed payments for at least one or two years, and a minimum credit score, typically at least in the mid- to high-600s. Sufficient time must elapse between the modification and your application to meet most of the minimum eligibility requirements for a refinance.

Changes That Can Help You Refinance After A Loan Modification

Positive changes that can help you get a refinance after a loan modification include:

Increased property values - With substantial equity, a refinance lender bears less risk because it finances a lower amount compared to your properties value. In general, 20 percent equity after a refinance is considered a healthy amount of equity.
Increased income
Low monthly expenses
Improved credit scores
New loan programs - Lastly, lenders continually introduce new loan programs and financing opportunities, therefore, you may see more lenders willing to refinance your modified loan when market conditions are improving.

Do You Need to Sell Your Property In Alabama?

We hope that through reading this Alabama loan modification guide, questions like “Can You Refinance After A Loan Modification In Alabama?” were answered.

We help families going through the challenging loan modification process sell their property quickly and avoid common financial mistakes. Imagine having to find a real estate agent, make repairs, clean, deal with open houses and showings, and pay commission and fees on top of all the work and stress in your already busy life…

Alabama Home Debt Relief Services eliminates these hassles. We take the stress out of selling your home, so you can keep on living your life. Our goal is to make your home sale as simple as possible.

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