FHA 203(b) Interest Rates: What You Need to Know
Just like many other types of FHA financing, 203b loans are offered as both fixed-rate and adjustable-rate loans. While, in general, fixed-rate loans are more common, ARMs may be better for lower-income borrowers who are trying to reduce their monthly payments, especially when interest rates are low. FHA ARMs may also be better for borrowers who plan to hold their home for only a few years and then sell it (hopefully for a profit).
FHA 203b fixed-rate loans are offered with 15, 20, 25, and 30 year terms, while 203b ARMs are generally offered as a 5/1 ARM. This means that the loan will have an initial 5-year fixed-rate period, followed by an adjustable-rate period in which the interest rate will be recalculated once per year.