FHA Did Not Approve 40-Year Loans For New Home Buyers. The New Rule Only Applies To Modifications Of Existing Loans

FHA Did Not Approve
Sleazy mortgage brokers are making TikTok videos filled with false information.

Greedy mortgage brokers are spreading misinformation on TikTok. This time its about recent a FHA announcement. The FHA announcement regards the increase the mortgage modification term to 40 years. Tik Tok creators are posting videos stating that FHA created a 40-year loan program for first time homeowners. Let’s make it clear! FHA did not approve 40-year loans for new applicants. 

The FHA announced a final rule last month that allows mortgagees to increase the maximum FHA-insured mortgage loan modification term from 360 months to 480 months. However, that only applies to loans in default. following a default. FHA said the change is slated to go into effect on May 8.

TikTok content creators have been posting videos claiming FHA approved a 40-year mortgage loan program for first-time home buyers.

The new FHA regulation is only a loss mitigation option. It is geared toward helping homeowners retain their homes after defaulting by giving them a lower monthly payment.

The 40-year loan modification can also assist borrowers in avoiding foreclosure by spreading the outstanding mortgage balance out over a longer period. 

One TikTok user who claims to be a financial advisor plays the role of a HUD advisor (which is highly illegal) states:

Right now, a 30-year FHA loan for $500,000 at 6.7% interest would cost $3,500 a month. What if we allowed a 40 year option that would only be $3280 a month saving them $220? 

The FHA’s final rule also aligns with modifications available for Fannie Mae and Freddie Mac-backed loans. 

Borrowers would see additional interest payments over the course of the extended term. However, HUD also noted that the opportunity for borrowers to retain their homes with a lower payment outweighs the drawbacks.

Read More About FHA Loans On MFI-Miami

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