Buying a home is a major milestone for anyone.
For most people, it is the biggest purchase they will make in their lifetime. Although, not everyone has the financial resources to buy a home outright. That's where mortgages come in. Mortgages are loans that are used to buy homes, and they are usually repaid over a period of 15 to 30 years. However, a new type of mortgage has recently been approved by the Federal Housing Administration (FHA) that offers a longer repayment period of up to 40 years.
In this blog post, we will explore the benefits of the newly approved FHA 40 year mortgage, and how it can save homebuyers money in the short term.
So, what exactly is the FHA 40 year mortgage?
The FHA 40-year mortgage is a new type of loan that allows homebuyers to borrow money over a period of 40 years. This is longer than the typical 15 to 30 year mortgage terms. The FHA 40-year mortgage is designed to make monthly mortgage payments more manageable for homebuyers. The monthly payments are decreased by spreading out the repayment period over 40 years, which makes it simpler for those on a tight budget to afford a home.
The fact that the FHA 40-year mortgage can help homebuyers save money in the short term is one of its most important advantages. As was already mentioned, the smaller monthly payments result from the longer repayment period, which makes it simpler for homebuyers to afford their mortgage payments.
Homeowners that are struggling with their mortgage payments are able to do a loan modification to this new FHA 40-year mortgage. By doing so, a lower monthly payment will allow them to allocate more of their funds to other costs.
According to a recent Yahoo article, Bankrate recently compared 30- and 40-year mortgages and found on a $312,000 loan at 6.85% interest, the monthly payments were $2,044 for 30 years and $1,904 for 40 years.
In connection with such, below is a breakdown of the amount of potential savings you could get when comparing a 30 year mortgage at 6.85% and 5.85%. Please note that we used 5.85% to depict the amount of savings you'd basically get from a 40 year mortgage (a 40 year mortgage is the equivalent of reducing your 30 year mortgage by a 1% interest rate).
(You can find said article here: https://news.yahoo.com/fha-approved-40-mortgage-homebuyers-012219691.html)
The FHA 40-year mortgage can save you money in the short term, but it's important to remember that in the long run, you will pay more. You'll end up paying more in interest because the loan is spread out over a longer period of time—40 years. This is because you will pay a higher interest rate with a longer loan term. Therefore, even though your monthly payments may be lower, you will end up paying more in interest over the course of the loan.
The FHA 40-year mortgage is still a great choice for homebuyers on a budget even though you will end up paying more in interest. People may find it easier to afford a home and to save money for other expenses as a result of the smaller monthly payments. Additionally, homebuyers can be confident that they are receiving a competitive interest rate because the loan is backed by the FHA.
In addition to such, history has shown that interest rates fluctuate. With a 40 year mortgage, as interest rates go down, buyers can potentially refinance to a shorter term mortgage to save money, making the 40 year mortgage an introductory type loan, thus further assisting first-time homebuyers.
In conclusion, the newly approved FHA 40 year mortgage is an excellent option for homebuyers who are on a budget. The longer repayment period means that monthly payments are smaller, making it easier for people to afford their mortgage payments. However, it is important to keep in mind that you will end up paying more in interest over the life of the loan. If you are considering buying a home, be sure to explore all of your options and speak with a reputable lender to determine which type of mortgage is best for you.
Thank you guys so, so much for taking the time to read this blog post - it's always a pleasure getting these up for everyone! We love talking about relevant news in the real estate space, so for all the latest happenings, stay tuned for more blogs every Monday, Wednesday, Friday, and Saturday!
As always, we'd like to give credit to the following websites for providing the inspiration, relevant insights, and the latest information needed to create this blog post. Go give their articles a read as well:
ABC 15 News: https://www.abc15.com/news/state/fha-approved-40-year-mortgage-for-homebuyers-in-may?_amp=true
Yahoo News: https://news.yahoo.com/fha-approved-40-mortgage-homebuyers-012219691.html