An FHA loan is attractive to many first time homebuyers for a few reasons, including a lower down payment and more lenient credit requirements than a conventional loan. While there are many benefits to an FHA loan there are also some additional costs such as the upfront mortgage insurance premium and a monthly insurance payment.
These fees can be tough to keep track of when you’re running the numbers to decide how much home you can afford. An FHA mortgage calculator can help you run different home buying scenarios and estimate what your monthly payments would be in each. This tool is helpful when figuring out how much of a home you can afford, budgeting your monthly payment, and figuring out how much of a down payment you should save.
Let’s discuss the details of an FHA loan, FHA mortgage insurance, and how an FHA mortgage calculator can help you estimate monthly payments and fees due upon closing.
What is an FHA Loan?
An FHA loan is a federally-backed mortgage loan that is insured by the Federal Housing Association. This type of loan is popular among first time home buyers due to the minimum required down payment of 3.5% and a lower minimum credit score requirement.
The loan allows for buyers who don’t have as much savings or who may have lower credit scores to still get a mortgage loan. Since the FHA will protect the lender in the case of a default, buyers who might not otherwise qualify for a home loan may be able to get approved for and more easily afford an FHA loan.
Most lenders are FHA-approved, which will make it easy for you to find a lender, such as Homefinity.
The most common type of FHA loan is a Basic Home Mortgage Loan 203(b). This type can have fixed or adjustable interest rates, and several types of homes are eligible.
An FHA home loan can be used to purchase or refinance a single-family house, multi-family home, or condominium. They can also sometimes be used to finance a new home build or for home upgrades.
An FHA mortgage calculator can give an estimate for what your monthly payment would be with this type of loan.
Affording FHA Mortgage Insurance Premiums
FHA mortgage insurance, or the Upfront Mortgage Insurance Premium (MIP), is built into every loan and is an upfront cost that can be rolled into the amount of the loan to be paid over time. Buyers will then also need to make monthly MIP payments after closing.
This insurance is what allows lenders to be more lenient with qualifications, as the FHA will protect them in the case of a defaulted loan.
An FHA mortgage calculator can help you figure out the amount of the monthly payments for the insurance premium based on your down payment amount. For example, if you have a 10% down payment at the time of purchase, then you will only need to make monthly MIP payments for 11 years. If your down payment is less than 10%, you will make monthly MIP payments for the full duration of the loan.
Understanding the Fees of an FHA Loan
FHA loan borrowers can expect to pay many of the same fees typically required in a conventional loan. One fee that is specific to an FHA loan is the upfront MIP that is due at closing. This fee is usually 1.75% of the loan. An FHA mortgage loan calculator can help to estimate this fee amount and other closing costs.
Other fees you can expect at closing from the lender or third parties could include the following:
- Origination fee
- Underwriting fee
- Document preparation fee
- Notary fee
- Credit report fee
- Recording fees
- Appraisal fee
- Courier fee
- Real estate attorney fees
- Flood certification fee
How to Use an FHA Mortgage Calculator
An FHA mortgage calculator can estimate what your monthly mortgage payment would be with an FHA loan, depending on the price of the home you’re considering and your potential down payment amount.
The calculator provides estimates based on the information that you input. Though this calculator can help you determine whether you or not you could qualify for an FHA loan, it is not an official pre-approval. It can, however, give you an idea of what loan amount you may be able to qualify for and afford.
Use the calculator when you begin to think about applying for an FHA loan to purchase a home and then use its estimates for when you are shopping around for FHA lenders.
What to Do With Information From an FHA Mortgage Calculator
An FHA mortgage loan calculator allows you to run different scenarios to help you figure out how much house you’re able to afford with an FHA loan. You can also determine how much of a down payment you will need to save.
A mortgage calculator can also help you determine what the limit of your house-buying budget is. You can input many different house prices to get monthly payment estimates and decide what is too much for you and how much you can realistically afford. An FHA mortgage calculator can also help you decide if an FHA loan is right for you.
What Information is Needed for an FHA Mortgage Calculator?
General information that you will want to input in the FHA mortgage calculator includes the price of the home you’re looking at, your down payment, and interest rate. You will also choose whether you want your loan term to be a 15- or 30- year loan. Other information that an FHA mortgage calculator might ask for includes the following:
- Zip Code
- Credit Score
- Property Taxes
- Homeowners Association Fees
Taking the Next Step To Buy a Home
With the information you gain from an FHA mortgage calculator, you can now find a loan officer to discuss your options and help you make the right home buying decisions.If you have more questions about an FHA loan or just general questions about buying a home, our professional loan officers are available when you are. Contact us today to start the conversation.