The Federal Housing Administration announced it's increasing term options to include a 40-year mortgage in May.
In March, the U.S. Department of Housing and Urban Development published a final rule when it comes to changes to FHA Loan Modification and Loss Mitigation.
According to the HUD, this rule is in response to help borrowers affected by COVID-19 or financial hardships.
FHA loan modifications are applied when borrowers are in default of their existing FHA loan due to financial difficulties or in need of loss mitigation.
The final rule passed by HUD allows services to approve loan modifications for borrowers.
This allows those specific borrowers to spread out their monthly payments over 40 years if Partial Claim Funds are not available.
Dan O'Connell, a Valley mortgage broker with OC Home Loans, works with people looking to buy homes or refinance.
"The short term is just that you're going to get a lower payment and a payment that you can afford," he said.
O’Connell said you may run into trouble if you choose to stay in your home, paying thousands more with current interest rates.
He says it all comes down to what fits right for you and your family's budget.
"It's just that we're at a particularly tough time,” O’Connell said. “Right now, where it's kind of the perfect storm of really high prices and really high rates."
When it comes to adjustable-rate mortgages, O’Connell added, "The ARM pricing isn't significantly better than the fixed-rate pricing, so it hasn't been a viable option."
The 40-year mortgage goes into effect on May 8.
EDITOR'S NOTE: This article has been updated with clarification of mortgage eligibility requirements.
