What is true about FHA loans in terms of a due on sale clause?

FHA loans do not have a due on sale clause, which allows borrowers to transfer their mortgage obligations to a new buyer without the risk of the loan becoming immediately due. This is particularly important for FHA loans as it encourages the transferability of loans in the housing market. When a property is sold, the buyer can assume the existing FHA loan, maintaining the original terms, interest rate, and payment schedule, which can be beneficial in situations where market interest rates have risen since the original loan was taken out.

In contrast, loans with a due on sale clause require the borrower to pay off the loan when the property is sold, which can discourage such transactions and limit the flexibility of selling a home. Understanding the significance of FHA loans' lack of a due on sale clause helps buyers and sellers appreciate the advantages these loans provide in terms of market fluidity and financial planning.