With an FHA Adjustable Rate Mortgage, can a borrower switch to a fixed-rate loan without refinancing?

With an FHA Adjustable Rate Mortgage, can a borrower switch to a fixed-rate loan without refinancing?

• A. True
• B. False
• C. Streamline Refinance
• D. Direct Endorsement

Answer: (A)

Assumability is what this item is testing. FHA loans are often assumable, meaning a qualified buyer can take over the existing loan. If the assumption is arranged so that the new borrower takes on fixed‑rate terms (instead of continuing the original adjustable schedule), the loan can effectively switch from an ARM to a fixed-rate without a new mortgage being originated. In other words, you can change the rate type through the loan transfer rather than starting a new loan. Of course, you must qualify under FHA rules and the lender’s guidelines, and not every situation will allow the rate to be fixed during an assumption.

Assumability is what this item is testing. FHA loans are often assumable, meaning a qualified buyer can take over the existing loan. If the assumption is arranged so that the new borrower takes on fixed‑rate terms (instead of continuing the original adjustable schedule), the loan can effectively switch from an ARM to a fixed-rate without a new mortgage being originated. In other words, you can change the rate type through the loan transfer rather than starting a new loan. Of course, you must qualify under FHA rules and the lender’s guidelines, and not every situation will allow the rate to be fixed during an assumption.