Using an FHA Loan Calculator in Texas: 8 Costs You Need to be Aware of
An FHA loan is the ultimate home loan option for the home buyers, who are looking for a loan with lenient requirements. Insured by the Federal Housing Administration, a homebuyer can apply for this loan with as low as a 3.5% down payment and 500 credit score. So, borrowers, especially low to medium income group people can easily apply for this loan and fulfil their dream of homeownership.
But before you apply for an FHA loan, you would like to know how much home you can afford. An FHA loan calculator Texas can help you with this. Before using this online calculator, you need to be familiar with some costs. Here are the ones –
Principal and interest
It is the amount, which goes toward paying off the loan balance along with the interest that you have to pay in each month. It remains the same for the life of your fixed-rate loan.
FHA mortgage insurance
FHA needs a monthly fee, which is not like private mortgage insurance. Known as FHA Mortgage Insurance Premium (MIP), this fee is a kind of insurance, which protects lenders against in case the home buyer fails to make the payment. Generally, the FHA MIP rate is 0.85%, however, it can vary based on your loan amount and down payment.
The country or the area in which the home is located charges a certain amount per year in taxes. The cost is split into 12 instalments and collected each month with your mortgage payments. Your lender will collect the fee because if property taxes are not paid on time, the country can seize the home. An online FHA calculator estimates property taxes and provides you with the result.
Mortgage lenders need you to insure your home from fire and other damages. This fee is collected with your mortgage payment, and the lender sends the payment to your insurance company each year.
In case you are buying a condo or a home in a Planned Unit Development (PUD), you might need to pay homeowners association (HOA) dues. Mortgage lenders focus on this cost when determining your ratios. You may need to put-in other home-related fees, but don’t include things like utility costs.
This is the amount you need to come with when you buy a home on credit. FHA requires at least a 3.5% down payment to get approval for the loan program. But the higher the down payment the better it would be for you. You can save it yourself or it can come from a down payment gift or eligible down payment assistance program.
The interest rate is the rate of interest that you have to pay over the life of the loan. To get the best rate, ask for quotes from different lenders, compare them and then pick the one, who offers the best rate to you.
The FHA needs an upfront fee that is wrapped into the loan amount. Like the monthly MIP, it insures lenders so they can approve loans at FHA’s lenient standards.
As you are now familiar with some basic costs that are associated with an FHA home loan program, you can now go online and use an FHA mortgage calculator to know how much home you can afford, and then take the steps accordingly.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.