FHA's adjustable-rate mortgage (ARM) insures home purchases or refinances with rates that can change after the initial fixed-rate period. Depending on market fluctuations after this initial fixed-rate period, your monthly payments could change due to rates increasing or decreasing. An ARM could be the right choice for you if you plan on staying in your home for just a few years, you’re expecting a future pay increase, or the current interest rate on a fixed-rate mortgage is too high.
Fixed-rate mortgages protect you against rising rates since the interest rate remains the same for the entire term of the loan. With FHA loans, you can select a 30-, 20- or 15-year term. The main difference is the lower term options have higher monthly payments, which also means you are building home equity faster. Keep in mind you can use equity as a down payment for your next home or a future cash-out refinance. If you plan on staying in your home for a longer time frame, a fixed-rate mortgage could be the right solution for you.
If you currently have an FHA mortgage, we may be able to help you reduce your interest rate and lower your monthly mortgage payments with an FHA streamlined refinance. Plus, a streamlined refinance requires limited borrower credit documentation and underwriting for an even easier process. This may be the right solution if you want to convert your ARM to a fixed-rate loan