FHA Adjustable Rate Home Loan
Also referred to as the FHA variable rate mortgage loan, the highly competitive program covers 1 – 4 unit homes, condos, PUDS, and town houses. FHA’s variable rates are designed to provide a safety cap for the borrower against larger monthly payments and interest adjustments common to private enterprise loans. Annual interest on the mortgage may rise or decrease with a 1% cap per year. And the lifetime cap on such adjustable mortgage should not exceed 5% the initial rate – private loans are 6%.
It’s good to note that the FHA does not charge an initial low (teaser) rate which often masks the real rate to the borrower. A FHA mortgage may take as much as five years to reach its highest rate whereas private loans currently have a 3 year cap on this.
A benefactor of the FHA adjustable rate mortgage loan may calculate what the interest rate would be using the following formula:
Index + Margin = Interest Rate
The index amount is taken from the economic indicator index called the 1 year T-bill rate.
A FHA variable rate loan qualifies for loan streamlining to become a FHA fixed rate loan at any point.
Find more information FHA mortgage loans. Make sure to use the Texas FHA Loan finder tool to find the best option for you.
