New 40-Year FHA Loan Modification Option

There is a proposed change to the FHA options offered to homeowners and buyers in terms of mortgages. With a longer-than-ever 40-year term announced with the intent of helping keep people in their homes, reduce foreclosure actions and make housing more affordable.

The Introduction of the 40-Year FHA Loan Modification Option

the FHA has introduced a proposal that would add an additional 120 months to the maximum terms for mortgages. This would create a 40-year option for those looking to obtain an FHA loan modification as a result of the impact of the pandemic.

The immediate goal of this move is to reduce monthly payments, with the larger goal being to prevent more people from facing foreclosure. The Department of Housing and Urban Development is in favor of the move, offering the opinion that doing so will prevent thousands of families each year from losing their homes due to foreclosure.

Why Lengthen the Terms of a Mortgage?

Many financial advisors guide their clients toward shorter terms when it comes to mortgages. The sooner you can repay a loan, the better – at least in most cases. This is certainly true of conventional thinking when it comes to a home loan.

However, the last few years have brought some very exceptional circumstances into play for most people. The pandemic largely changed the look of employment and income for many families, and those impacts are still being felt. With that in mind, it is no wonder so many people have been forced to think outside the box when it comes to making ends meet and remaining in their homes.

When the terms of mortgage repayment are lengthened, there is more time for the homeowner to repay that loan. In the case of the 40-year mortgage repayment plan, the payments are spread out across 480 months, as opposed to 360. Those additional years mean that the monthly payments are much lower, which is much more manageable for many American homeowners in the current economic landscape.

Is the Lower Payment Worth the 120 additional months?

One major drawback is that with slower repayment, homes will accrue equity much more slowly than they would with a 30-year or shorter loan term. Another issue is that more interest payments will be present, adding up to a larger overall total that must be repaid.

These are things that should be clearly stated before a person modifies their loan terms – and understood as part of the agreement. Before making this decision, be sure to go over all these terms and conditions with the financial institution you are working with.

Should You Modify? Let Us Help You Decide!

An FHA loan modification can be a good option for those who are looking for ways to remain in their homes and continue paying their mortgage payments despite changing circumstances. However, the process is not suitable for every person and financial situation.

If you have concerns about keeping up with your mortgage payments and would like to explore your options, we can help you do that. The team at the Bond & Botes Law Offices has ample knowledge and experience when it comes to federal housing laws. Our goal is to help you better understand your options – and guide you through the process of choosing the best one for you.

Don’t continue living in the cycle of stress that the pandemic’s economic fallout has caused. Give us a call today and let us help you explore your next steps.