April 30, 2013
One common FHA loan question is fairly simple and straightforward; how long can an FHA loan be?
In general, FHA loans are available for 15 or 30 year terms. FHA loan rules as spelled out in HUD 4155.1 state that there is a maximum loan term–one that depends on the type of transaction and other factors.
“The maximum mortgage term may not exceed 30 years from the date that amortization begins. In the case of adjustable rate mortgages (ARMs), the term must be for 30 years. FHA does not require that loan terms be in five year multiples.” FHA loan rules add, “Some programs require a shorter term, including certain streamline refinances made without appraisals.”
For FHA Streamline Refinances made without an appraisal, FHA loan rules state, “The streamline refinance mortgage term is the lesser of
• 30 years, or
• the remaining term of the mortgage plus 12 years.”
It’s important for all FHA borrowers to know that there is no penalty allowed for overpayments on an FHA mortgage, nor is there a penalty for paying off the mortgage early. Borrowers are encouraged to make additional payments or pay more than the minimum amount due on the loan each month–doing so can save the borrower money in interest payments over the lifetime of the loan.
It’s also worth pointing out that the maximum loan term–15 or 30 years unless otherwise specified–has nothing to do with the maximum loan amount. Some borrowers might wonder if agreeing to pay more on their mortgage payments every month–which in turn saves money in interest payments–might give them the opportunity to borrow more based on the savings on interest. But FHA loans are calculated with the assumption that the loan is to be carried through to the full term of the loan based on the written agreement.
It’s the borrower’s choice to pay more or not every month, but that choice will not affect the maximum FHA loan available to the borrower on that transaction. For more information on FHA loan issues like these, contact the FHA directly at 1-800 CALL FHA.
Do you have questions about FHA loans? Ask us in the comments section.