Fixed or Adjustable Rate?


FHA Loans - Fixed Rate FHA Mortgage Programs

Fixed rate loans are the most common of all FHA loan types. With no pre-payment penalty, these loans are fully amortized over a set term.

FHA offers the following terms for the fixed rate real estate mortgage program.

  • 30 year
  • 25 year
  • 20 year
  • 15 year

You can pay off or refinance an FHA loans at any time. They are assumable but subject to loan qualifying.


FHA Loans - Adjustable Rate Mortgage Program

An FHA Adjustable Rate Mortgage (ARM) is one of the better adjustable rate mortgages available in today’s market. ARM Loans from the FHA can be used on 1-4 Unit Homes in addition to condos, town houses, and PUDs.

Many other adjustable rate mortgages off an initially low rate to ‘tease’ potential borrowers in. FHA does not offer an initial low rate so they will normally start at a marginally higher rate than most. ARMs from an FHA adjustable mortgage protect you – the homeowner – from larger interest rates adjustments common with other loans.

  •  The yearly interest can rise or decrease no more than 1% per year vs. 2% for a conventional loan.
  •  The lifetime cap of the FHA adjustable mortgage is no more than 5% over the initial start rate vs. 6% for a conventional loan.
  •  Therefore, an FHA can take 5 years before reaching its maximum rate vs. a conventional loan can cap in only 3 years.
  • FHA's adjustable rate mortgage is based on the economic indicator index called the 1-Yr. T-Bill.


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