What does the Section 251 Adjustable Rate Mortgage program provide?

The Section 251 Adjustable Rate Mortgage program specifically provides insurance for adjustable rate mortgages. This program is part of the Federal Housing Administration (FHA) and is designed to help protect lenders from the risk associated with variable interest rates, which can change periodically based on market conditions. By offering this insurance, the program aims to support both lenders and borrowers in the adjustable rate mortgage market.

Adjustable rate mortgages can be beneficial for borrowers because they often start with lower initial interest rates compared to fixed-rate mortgages. However, with the potential for future rate increases, there is an inherent risk involved. The insurance provided by the Section 251 program mitigates this risk, enabling lenders to offer these types of loans more confidently.

In contrast, the other options do not align with the specific purpose of the Section 251 program, as it is not intended to provide insurance for fixed rate mortgages, reverse mortgages, or construction loans. Each of those loan types has its own distinct characteristics and insurance programs that cater to their unique needs.