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Published on Monday, 31 May 2010 18:33

FHA ARM | 251 Mortgage Loan

The section 251 mortgage loan provides FHA insurance on adjustable rate mortgages (ARM's) for purchase or refinance loans.

This enables low to moderate income borrowers the ability to purchase or refinance their home at a lower initial interest rate.

FHA Section 251 ARM loan features:

1. Interest rates adjust yearly.  The FHA uses the 1-year Treasury Constant Maturities Index to determine rate changes.  The interest rate may adjust up or down depending on the current market


2. The interest rate may not adjust more then 1 percent up or down in any given year and may not change more then a maximum of 5 percentage points over the life of the loan.


3. Borrowers must be informed at least 25 days in advance before any adjustment can be made to their monthly payment.


4. Many closing costs can be financed into your FHA mortgage loan.
   
   With most conventional mortgages, the borrower must pay, at the time of closing, costs equivalent to 2-3 percent of the price of the mortgage loan.
   
   By allowing the borrower to finance many of these charges,  the borrowers upfront costs are reduced significantly when buying a home.


5. FHA rules put limits on some of the fees charged by your lenders.  For example,  the mortgage origination fee charged by the lender may not exceed 1 percent of the amount of the mortgage and the tax service fee is not allowed on the 251 mortgage loan.