The Federal Housing Administration (FHA) recently made an announcement in the housing and mortgage world. They are now allowing FHA mortgages to be modified to 40-year mortgages. This means that those with a 30-year FHA mortgage can extend their loan term to 40 years and lower their monthly payments significantly.

In addition, FHA lowered the amount of PMI, which stands for private mortgage insurance, from typically $150 to $200 to insure a mortgage. Many homebuyers do not want to pay this cost, but it can be a way to obtain homeownership and build equity while living in the house. With the reduction, the PMI cost is now 50% lower.

However, there’s one important thing to note: Currently, you cannot walk into a bank and obtain a 40-year loan. This option is only available for loan modification, and only if you already have an FHA loan. The FHA often experiments with new programs before fully implementing them, so if the 40-year modification program proves successful, it may become available in the future for new borrowers.

While some may criticize the idea of a 40-year mortgage due to the additional interest payments, it can be a great option for those who plan to move within the next five to 10 years. This approach allows them to enter the housing market with a lower upfront cost and still build equity, which is beneficial compared to putting down 20% of the home's value.

This program can be a great opportunity for many Americans to qualify for homeownership and lower their payments. If you have any questions or want to learn more about this program, feel free to call or email me. I’m always happy to help.