February 22, 2024
Are you worried about FHA loan interest rates? If you have decided to explore your home loan options with an FHA adjustable rate mortgage, here are some important details to know while still planning and saving up for the loan.
FHA ARM Loans Differ From Conventional ARM Loans
An FHAS adjustable-rate mortgage isn’t necessarily the same as a conventional equivalent. Your conventional lender’s occupancy guidelines will vary.
Does yours have a requirement that the property securing the ARM loan serves as your home address? FHA ARM loans definitely require this as a condition of loan approval.
Occupancy is key in that at least one borrower obligated on the FHA loan must live in the home being refinanced or purchased with an ARM.
FHA loan rules on occupancy extend to nearly every type of single-family home loan offered under the program.
Down Payments Are Not Optional For FHA Purchase Loans
Whether you apply for a fixed or adjustable rate mortgage, your FHA mortgage requires a minimum down payment of 3.5%.
This can come from your own savings, from a downpayment assistance program, or from friends or family.
FHA ARM Loan Appraisal Rules
An FHA ARM loan is an appraisal-required transaction. It does not matter if you buy or refinance your house; typically, the only FHA purchase loan that will not require an appraisal in the same way is the FHA 203(k) rehabilitation mortgage.
FHA refinance options without an appraisal are limited to the FHA streamline refinance program.
An FHA ARM to purchase must typically go through the same appraisal process as a fixed-rate mortgage.
FHA ARM Loans Are Subject To FHA Loan Limits
The same rules apply to ARM loans as for FHA fixed-rate mortgages. If you need an FHA mortgage exceeding that county’s loan limit, you may need to apply for a jumbo loan.
FHA Mortgage Insurance Is Required For ARM Loans
An FHA ARM may differ from fixed-rate loans in terms of the interest rate and how that rate is adjusted over time, but the same mortgage insurance requirement, including the payment of an up-front mortgage insurance premium will apply.
FHA ARM Loans Versus Conventional ARMS
How do FHA ARM loans match up to conventional ARMs? One important area to review is the interest rate adjustment issue.
Ask a participating lender to show you the FHA and conventional ARM loan options so you can see which terms and conditions apply and which of those give you the best advantage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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