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FHA LOAN word on calculator.

FHA loan calculator

ANDREI ASKIRKA / Shutterstock

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Updated: April 19, 2024

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An FHA loan is a mortgage that the Federal Housing Administration insures. This type of loan requires a lower minimum down payment and lower credit scores than many conventional loans. If your credit score is 580 or higher, you can put down as little as 3.5% of the purchase price. If your score is between 500 and 579, you must put down 10%.

Since the government backs FHA loans, lenders feel more comfortable offering mortgages to people who may not qualify for a conventional loan. This government support makes home buying more accessible for first-time homebuyers or those with lower credit scores.

But does the lower down payment and more straightforward credit requirements make an FHA loan the right choice? 

FHA Loan Calculator


How to use an FHA loan calculator

1. Enter the maximum FHA financing:

  • Set the FHA down payment required: If you're unsure, put in 3.5% here—it's the minimum down payment required for most borrowers with FHA loans.
  • Input the contract sales price: Enter the home purchase price you’re considering. 
  • Enter the appraised value of the home: Ideally, you have this from a professional appraiser. If you're still in the early stages, use the current sales price or the actual appraised value stated in the listing.
  • Enter any adjustments: These could be gift funds or if the seller paid financing fees over 3%. If you and the seller need no price adjustments, enter $0.

2. Review total cash to close:

  • Borrower-paid closing costs: Enter the closing costs you expect to pay. If the seller covers all closing costs, enter $0.
  • Prepaid expenses: Include any prepaid items such as insurance premiums or property taxes required at closing. If you're unsure, enter $0 for now.
  • Enter discount points: If you plan to buy discount points to lower your interest rate, enter this amount; otherwise, enter $0.
  • List repairs or home improvements (non-financeable): Add any costs for repairs or improvements to the home that you'll pay out of pocket (and can't be included in the loan financing). Enter $0 if the house needs no repairs or improvements (or you won't be taking any on).
  • MIP paid in cash: If you are paying the upfront mortgage insurance premium out of pocket rather than rolling it into the loan, enter the amount here. Usually, it's rolled into the loan.
  • Non-realty and other items: Include any additional costs associated with the transaction that have yet to be covered in different fields. Enter $0 if there are none.

3. Top of the FHA loan mortgage calculator:

  • Calculate: Press the 'Calculate' button to update the output data based on your inputs.
  • View report: After calculating, you can view a detailed report. This report will give you a clearer picture of your financial requirements at closing, the total amount of MIP financed and the net amount available for the purchase.

You can also use the hamburger menu (three stacked horizontal lines in the top right) to clear fields, email the report or save a copy of your calculations for your records.

How an FHA loan works

An FHA loan provides you with mortgage insurance issued by the Federal Housing Administration, part of the U.S. Department of Housing and Urban Development. This insurance protects the lender if you default on the loan, making lenders more willing to offer more favorable terms.

Here's how it works:

  • Eligibility check: You must meet specific criteria, including a credit score of at least 500 and a good debt-to-income ratio (typically 43% or lower).
  • Down payment: If your credit score is 580 or higher, you can start with a down payment as low as 3.5%. If your score is between 500 and 579, you need a 10% down payment.
  • Mortgage insurance: You pay two types of mortgage insurance premiums—upfront and annual. 
  • The upfront premium is usually 1.75% of the loan amount, and it can be rolled into the mortgage. 
  • The annual premium depends on the loan amount, length, and initial loan-to-value ratio and is typically 0.45% to 1.05% of the loan amount, paid annually but divided into monthly payments.
  • Loan application: You apply through an FHA-approved lender. The lender evaluates your application based on FHA guidelines.

Read more: Best online mortgage lenders

Read more: Best lenders for bad credit

  • Closing: If approved, you proceed to closing, where you finalize the paperwork, make the initial down payment, pay closing costs and take over the property.

So, gather your financial documents, check your credit score and consider contacting an FHA-approved lender to discuss your specific situation and determine whether an FHA loan is a feasible option.

What documents do I need for an FHA loan?

  • Proof of identity and legal residency: A government-issued ID (e.g., passport, driver's license) and a Social Security card.
  • Tax returns: The last two years of federal tax returns to verify your income.
  • W-2 statements and/or 1099s: Whether you’re an employee or an independent contractor, these forms show your earnings from the past two years.
  • Pay stubs: Provide recent pay stubs, usually covering the last 30 days, to prove current employment and income.
  • Bank statements: 2-3 months of bank statements for all your accounts to show your savings and any cash reserves.
  • Credit report: Your lender can get this, but it’s worth checking your credit report beforehand to ensure all information is accurate and up-to-date and to give you time to correct any issues. Here’s how to check your credit score for free.
  • Report of other income: This might include proof of rental income, side hustle money, child support, or any other source of income you want your lender to consider. 
  • Loan and debt information: Documentation for any other loans or recurring debts you have.

What expenses are included in a monthly FHA mortgage payment?

Your monthly FHA mortgage payment includes principal, interest, taxes, insurance (PITI), mortgage insurance premiums and possible homeowners’ association (HOA) fees. 

Here’s the complete list: 

  • Principal: The portion of your payment goes towards paying down the borrowed amount. 
  • Interest: The cost of borrowing that principal money from the lender. 
  • Property taxes: Your estimated annual property taxes are divided by twelve and added to your monthly mortgage payment.
  • Home insurance: Covers potential damage to your property from water, fire, or theft, as well as liability if someone is injured on your property. The annual premium, like property taxes, is divided by twelve and included in your monthly payment.
  • Mortgage insurance premiums (MIP): Since FHA loans come with government backing, you must pay mortgage insurance. This insurance includes an upfront premium you can group into the loan and an annual premium divided into monthly payments.
  • HOA fees: If your home is in a community with a homeowners' association (HOA), you may see these fees reflected in your monthly payment.

FAQs

  • Can I get an FHA loan with a low credit score?

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    Yes, you can obtain an FHA loan with a low credit score. FHA loans are designed to help borrowers with lower credit scores, allowing for scores as low as 500. However, if your score is between 500 and 579, you must make a 10% down payment. A higher score, 580 or above, allows for a smaller down payment of 3.5%.

  • How much of an FHA loan can I get approved for?

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    The amount you can get approved for with an FHA loan depends on your income, debts, and the loan limits in your area. Lenders typically use a debt-to-income ratio to determine how much you can borrow, aiming to keep your total housing payment under a certain percentage of your monthly income.

  • What are the closing costs with an FHA loan?

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    Closing costs with an FHA loan typically range from 2% to 6% of the loan amount. These costs include appraisal fees, attorney's fees, loan origination fees, and upfront mortgage insurance premiums. The exact amount can vary based on your location, the lender, and the specifics of your loan.

  • How can I lower my FHA mortgage payment?

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    To lower your FHA mortgage payment, consider making a larger down payment to reduce the borrowed amount. Additionally, improving your credit score can help you qualify for better interest rates. Another option is to extend the term of your loan, spreading the payments over a more extended period.

  • Can I refinance an FHA loan?

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    Yes, you can refinance an FHA loan. The FHA offers several refinancing options, including the streamlined refinance program. This program simplifies the process if you are already on an FHA loan and looking to lower your interest rate or change the terms. It typically requires less documentation and no appraisal.

Tyler Wade Content strategist & writer

Tyler Wade has worked in personal finance for over 5 years writing for brands like Ratehub, Forbes, KOHO, and now Moneywise.com.

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