By Phil Ganz
Edited by Ryan Skerritt
Struggling to keep up with your mortgage payments can be stressful, but the FHA has introduced a new home retention option to help.
The FHA's Payment Supplement program allows borrowers to temporarily reduce their monthly payments by up to 25%.
Verify Your FHA Loan Refinance Eligibility
In this article, we'll cover how the program works, its benefits, requirements, and how it compares to other FHA options like the Streamline Refinance.
What is the FHA Home Retention Option?
The FHA Home Retention Option, called the Payment Supplement, is a temporary solution designed for borrowers with FHA-insured mortgages who are behind on payments.
It offers a way to reduce monthly payments by up to 25% for up to three years.
The Payment Supplement works by using funds from a Partial Claim, which brings the mortgage current and then supplements the monthly principal and interest payments.
Verify Your FHA Loan Refinance Eligibility
Benefits of the FHA Payment Supplement
- Temporary payment relief: Borrowers can reduce their mortgage payments by up to 25% without altering their interest rate.
- No immediate out-of-pocket cost: The Partial Claim funds are paid back when the borrower sells, refinances, or the mortgage ends.
- Prevents foreclosure: This program helps borrowers avoid losing their homes by reducing financial strain.
FHA Payment Supplement Requirements
To qualify for the Payment Supplement, borrowers must:
- Have an FHA-insured single-family mortgage.
- Be behind on their mortgage payments.
- Not have exhausted their Partial Claim allowance from previous loss mitigation efforts.
- Be facing a hardship that prevents them from making full mortgage payments.
Verify Your FHA Loan Refinance Eligibility
Downsides of the FHA Payment Supplement
- Temporary solution: The payment reduction lasts for up to three years, after which full payments must resume.
- Accrued debt: The Partial Claim amount becomes a lien, which must be paid off when the home is sold or refinanced.
- Not a permanent modification: This option does not reduce the mortgage interest rate or alter the loan terms permanently.
FHA Payment Supplement vs. FHA Streamline Refinance
The FHA Payment Supplement provides temporary relief by reducing monthly mortgage payments by up to 25% without changing the interest rate.
It’s best for homeowners who need short-term help but already have a low interest rate.
In contrast, the FHA Streamline Refinance offers a permanent solution by lowering the interest rate or adjusting the loan terms.
It's ideal for borrowers seeking long-term savings, but may not help those with an already low rate who need immediate relief.
Verify Your FHA Loan Refinance Eligibility
Benefits of FHA Streamline Refinance
- Lower interest rates: Potentially reduce your mortgage rate and monthly payments.
- No appraisal required: Often doesn’t require a new property appraisal.
- Simplified process: Easier and quicker than traditional refinancing options.
- No income verification: Some borrowers may not need to provide proof of income.
- Lower closing costs: May come with reduced fees and closing costs.
Our Recommendation
If you're facing a temporary financial hardship and your current mortgage interest rate is lower than what's available on the market, the FHA Payment Supplement is an excellent option to consider.
It offers a short-term reduction in payments to help you stay in your home while you get back on your feet.
However, if you're looking for long-term savings or a permanent change to your mortgage, an FHA Streamline Refinance might be a better fit.
With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.
About Author - Phil Ganz
Phil Ganz has over 20+ years of experience in the residential financing space. With over a billion dollars of funded loans, Phil helps homebuyers configure the perfect mortgage plan. Whether it's your first home, a complex multiple-property purchase, or anything in between, Phil has the experience to help you achieve your goals.
About Editor - Ryan Skerritt
Ryan Skerritt has over 10+ years of experience in the residential financing space. With over two hundred and fifty million of funded loan volume, Ryan has the skill set to help any homebuyer configure the perfect mortgage plan.
