22939 West Hacienda Drive | Grass Valley, CA 95949
Call Juli Matta
Juli@JuliMatta.com
Ph: (530) 268-3333 | Fax: (530) 268-9674

Ca BRE #01031943 NMLS #355267

22939 West Hacienda Drive | Grass Valley, CA 95949
Call Juli Matta
Juli@JuliMatta.com
Ph: (530) 268-3333 | Fax: (530) 268-9674

Ca BRE #01031943 NMLS #355267
Saturday, August 18, 2018
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FHA Single Family Adjustable Rate Mortgages

This program provides insurance for adjustable rate mortgages, used in conjunction with other widely used FHA single-family products: One- to Four-Family Homes (Section 203(b), includes condominium units) and Rehabilitation loans (Section 203(k)). FHA’s program, Section 251, insures adjustable rate mortgages (ARMs) which, particularly during periods when interest rates are high, enable borrowers to obtain mortgage financing that is more affordable by virtue of its lower initial interest rate.

Under this FHA-insured mortgage product, the initial interest rate and monthly payment are low, but these may change during the life of the loan. FHA uses 1-year Treasury Constant Maturities Index to determine interest rate changes. The maximum amount the interest rate may increase or decrease in any one year is 1 percentage point. Over the life of the loan, the maximum interest rate change is 5 percentage points from the initial rate. Lenders must disclose to the borrower the terms of the ARM at the time of loan application. In addition, borrowers must be informed at least 25 days in advance of any adjustment to the monthly payment. In most other respects, Section 251 loans are similar to basic FHA-insured single-family loans.

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