FHA ARM Loan Options in an Uncertain 2023 Housing Market
July 2, 2023
FHA loans are for any financially qualified borrower. They aren’t need-based loans. There is no income cap or demonstration of hardship required to be approved for an FHA mortgage.
These home loans are government-backed, so they have more flexible FICO score requirements than some conventional counterparts.
But in an uncertain housing market, who can qualify for an FHA loan even with its more forgiving credit requirements?
The basics--extremely basic, as you’ll find this information in most mortgage blogs or lender websites--include a need for FICO scores of 580 or better to qualify for the FHA’s minimum down payment of 3.5%.
You’ll also learn that lenders typically have standards closer to the mid-600 range for home loan approval on a typical basis.
What About More Complex Home Loan Issues?
But what about the information you might not read on other mortgage blogs? How to use current market trends to your advantage? At the time of this writing (the end of June 2023), the mortgage market was supposed to be in a recovery mode entering the 3rd quarter of 2023. What was the reality?
A potentially more resilient housing market, but not the full move toward recovery many hoped to see by now.
Some analysts, including those at Mortgage News Daily, note that the Fed has announced potential future interest rate hikes that typically might put investors in “worry mode” with thoughts of safer investment choices. But the most recent announcements seem to be getting a different reception.
Fed rate hikes tend to drive mortgage rates higher (the investment choices, not the Fed’s actions), but this time, the mortgage market seemed to weather the Fed news--that more hikes are likely--better. What does that mean going forward?
A Recovery Looming?
That resiliency in and of itself might not mean much, but could it be an early indicator that a housing market recovery might be coming soon? It may not reach its full swing in the 3rd quarter of 2023, as some predicted late last year. But it could be in the works...if conditions continue to improve.
Some considered their FHA ARM or conventional ARM loan options earlier in the tough housing market we’ve been experiencing, but there were likely plenty of those who chose to wait because there wasn’t any accurate indicator of when the end might be near.
If the market continues on this “resilient” path, choosing an ARM loan might make sense. When there seems to be an end to the problem, it’s easier to commit to a workaround like an FHA ARM loan.
Is an ARM loan right for you? Much depends on your financial needs and goals for the loan, but it's important to approach an ARM loan with an exit strategy. Don’t apply for an adjustable rate loan without knowing what you might choose to do when the rates begin adjusting.
------------------------------
RELATED VIDEOS:
Keep Your Eyes on Your Loan Balance
Learn About FHA Loan Prepayments
Taking Out a Home Loan Makes You a Borrower
These home loans are government-backed, so they have more flexible FICO score requirements than some conventional counterparts.
But in an uncertain housing market, who can qualify for an FHA loan even with its more forgiving credit requirements?
The basics--extremely basic, as you’ll find this information in most mortgage blogs or lender websites--include a need for FICO scores of 580 or better to qualify for the FHA’s minimum down payment of 3.5%.
You’ll also learn that lenders typically have standards closer to the mid-600 range for home loan approval on a typical basis.
What About More Complex Home Loan Issues?
But what about the information you might not read on other mortgage blogs? How to use current market trends to your advantage? At the time of this writing (the end of June 2023), the mortgage market was supposed to be in a recovery mode entering the 3rd quarter of 2023. What was the reality?
A potentially more resilient housing market, but not the full move toward recovery many hoped to see by now.
Some analysts, including those at Mortgage News Daily, note that the Fed has announced potential future interest rate hikes that typically might put investors in “worry mode” with thoughts of safer investment choices. But the most recent announcements seem to be getting a different reception.
Fed rate hikes tend to drive mortgage rates higher (the investment choices, not the Fed’s actions), but this time, the mortgage market seemed to weather the Fed news--that more hikes are likely--better. What does that mean going forward?
A Recovery Looming?
That resiliency in and of itself might not mean much, but could it be an early indicator that a housing market recovery might be coming soon? It may not reach its full swing in the 3rd quarter of 2023, as some predicted late last year. But it could be in the works...if conditions continue to improve.
Some considered their FHA ARM or conventional ARM loan options earlier in the tough housing market we’ve been experiencing, but there were likely plenty of those who chose to wait because there wasn’t any accurate indicator of when the end might be near.
If the market continues on this “resilient” path, choosing an ARM loan might make sense. When there seems to be an end to the problem, it’s easier to commit to a workaround like an FHA ARM loan.
Is an ARM loan right for you? Much depends on your financial needs and goals for the loan, but it's important to approach an ARM loan with an exit strategy. Don’t apply for an adjustable rate loan without knowing what you might choose to do when the rates begin adjusting.
------------------------------
RELATED VIDEOS:
Keep Your Eyes on Your Loan Balance
Learn About FHA Loan Prepayments
Taking Out a Home Loan Makes You a Borrower
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