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How to Calculate Payments on FHA Home Loans

For many, FHA insures some of the best options out there for getting an affordable home loan. While traditional loans will have much stricter requirements, Government financing is often easier to get and feature lower FHA down payment requirements, lower credit score requirements, and are often easier to get for those with lower income levels.

Before you start the process of applying for an FHA loan, you'll still want to spend some time planning ahead. Spending a few minutes doing some research online can help, and taking the time to calculate what your payments will be and whether or not they'll fit into your budget is important. A home loan, even an FHA one, is a major step in your life and you need to make sure that it is right for you.

There are a few things to remember when you start the process, and the first is that you need to know the overall price of a home and what your down payment will be. There are two keys to keep in mind:

  • Those with a credit score of less than 580 will be required to provide a down payment of 10 percent of the total cost of the home.
  • Those with a credit score above 580 will only be required to come up with 3.5 percent of the total home cost as their down payment.

Using those two figures, take the price of the home loan you need and subtract the down payment. This will give you the base loan amount that you will need to borrow. From here, things can get incredibly complicated, and calculating things like mortgage lengths, interest rates, and more will all have to be factored into the calculations. For most, it's a lot of math and while you can break down the totals on your own, there's a better option.

Instead of doing the math on your own, using an FHA loan calculator is a much better choice. Thanks to the internet, it's easy to find a calculator for FHA home loans and easily plug in a few basic numbers. Online calculators let you enter key bits of data including:

  • Total purchase price of home
  • Your down payment
  • Term of loan (15 or 30 year loan)
  • Interest rate
  • Property taxes
  • Homeowners insurance

By entering this information into the FHA mortgage calculator, you'll be able to quickly see what your monthly payments will be. It eliminates the hard work of doing the math, and gives you exactly what you will be paying. Rates on FHA loans are outstanding so take a few moments and calculate the payments now.

There are also other calculators available that will help you determine just what you can afford. These calculators let you enter in the same information as above, but also allow you to enter non-mortgage debt to get an idea of what kind of price range you should be looking at when you shop for a home and for a home loan. See other mortgage calculators.

Knowing what kind of loan payment to expect when you take out an FHA loan is important, and a big step in deciding if the time is right to secure a loan. Online calculators make it easy to do just that.

6 Ways a FHA Mortgage Calculator Can Help New Home Buyers with Affordability

Calculate monthly payments on FHA loans

If you are thinking about buying a home with an FHA loan, good for you! This is a really great mortgage program for people with past credit issues and not a lot of money for a down payment. The Federal Housing Administration is backed by the US government. This means that the government will pay off your lender if you do not pay your mortgage. This gives you access to lower interest rates and a down payment as low as 3.5%!

To determine how much home you can afford with an FHA loan, you should use a good FHA mortgage calculator, such as the one here. By using a good FHA loan calculator, you should have a good grasp on how big of a mortgage you can handle. Consider these various fields on the above calculator:

#1 Down Payment Required

This includes how much of the home's contract sales price, plus any adjustments required, that you must pay at closing and not borrow from the lender. You should know if the appraised value of the home is under the sales price, the required money down will be the appraised value plus any required adjustments, plus any difference between the sales and appraised prices. Usually, the minimum down payment is only 3.5%, which is very affordable for most people.

Obviously, the more money you put down, the less you will pay per month on your mortgage. You can use this calculator field to see how much your payment will change if you put down 3.5%, 5%, 10% and 20%. It will change a lot, but of course, you have to have the cash to do this.

#2 Contract Sales Price

This is the actual dollar price that you are paying for the home entirely. This does not include your closing costs. You can play with the calculator to change the contract sales price to see how your monthly payments and lifetime interest charges with change if you get a better or worse deal on the house.

#3 Borrow Paid Closing Costs

All mortgage loans have closing costs, including FHA loans. Fortunately, you can ask the seller to pay some of your closing costs if you like. The builder also may pay some of your closing costs if you ask them. Some borrowers tend to forget about closing costs, but should not. This can amount to anywhere from 2-5% of your sales price. You need to keep closing costs in mind as you save for your down payment. You can use the calculator to see how another party paying part of your closing costs will affect your out of pocket expenses.

#4 Required Adjustments

This amount will drop the contract sales price before you calculate the minimum down payment needed. One of the most common adjustments is for gift funds. FHA loans do allow borrowers to use gift funds to pay for the down payment. However, it must be in the form of a gift and may not be a loan. This is a stipulation that could cause problems with some family members, so make sure that the person is willing to give you the money as a gift. Use the calculator to determine how much your gift funds for your down payment will lower your monthly payment.

#5 Appraised Value of Home

If this number, plus required adjustments is less than the sales price in the contract, the appraised value must be used to determine the maximum mortgage, rather than the contract sales price.

#6 MIP Paid in Cash

All FHA loans require two types of mortgage insurance. One is an upfront premium that can be wrapped into the loan. The other is an annual policy that you pay monthly with your loan payment. You can opt to pay the upfront mortgage premium in cash if you like which will reduce your loan balance.

The calculator in this case can help you to determine if you are better off paying the upfront mortgage insurance or wrapping it into the mortgage. As you are considering the affordability factor of your FHA mortgage, it is worth remembering FHA loan limits:

  • FHA will set limits on how much home you can buy based upon where you live. You can learn about the loan limits in your area at the HUD website.
  • FHA wants to see that your monthly mortgage obligations do not exceed 31% of your gross monthly income.
  • FHA also wants to see that your monthly debt obligations do not go over 43%.
  • You can possibly push these limits, but you will probably pay a higher interest rate.

The FHA mortgage and a good FHA loan calculator are great tools to help you get a home that you can really afford without breaking your budget.

 

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