An FHA loan is a type of government home loan program that the Federal Housing Administration insures. It’s a popular mortgage choice, especially for first-time homebuyers, because an FHA loan has lower down payment requirements than conventional loans.
But there are extra costs related to these loans that you might not be aware of. You can use an FHA loan calculator. to help figure out what your monthly mortgage payment and total cost might be.
(Learn more: Personal Loan Calculator)
Why Use a FHA Loan Mortgage Calculator Table
An FHA loan mortgage calculator table has several benefits for homebuyers. These include:
- Cost estimations: The calculator table can provide estimates of monthly mortgage payments. It helps borrowers plan their budget by showing the expenses involved in buying a home.
- Time-saving: Mortgage calculations can be confusing and complicated for first-time homebuyers. The calculator table helps simplify and speed up this process.
- Comparison tool: Buyers can compare options by entering different scenarios into the calculator table. A different interest rate or purchase price will change the monthly payment amounts. A buyer can compare homes and even different types of mortgage loans to help decide which property and loan to move forward with.
- Informed decision-making: An aspiring homebuyer can use the table to determine the various costs involved in an FHA loan. They can plug in different numbers, such as a lower or higher down payment or a different loan term to see how that might change their monthly payments.
- Financial planning: Overall, the calculator could help borrowers figure out what they can afford now and how to plan for future payments.
How to Calculate Your FHA Loan Mortgage Costs
Calculating a government home loan like an FHA loan mortgage involves several steps. These include:
- Determining the loan’s principal amount and interest. The principal is the amount of money the homebuyer borrows from the lender. The interest is the cost of borrowing the money.
- Adding property taxes and homeowners insurance. Homebuyers typically pay state and local property taxes. And you’ll also need homeowner’s insurance to insure the house against theft, damage, or loss, among other things.
- Including the Mortgage Insurance Premium (MIP). The MIP protects lenders in case the borrower defaults on their mortgage payments. Borrowers pay an upfront MIP of 1.75% of the loan amount, and then they pay an annual MIP that’s typically charged in monthly installments as part of the mortgage payment.
- Adding the loan term. This is the length of the loan, which is usually 15 to 30 years for an FHA loan.
- Finally, plugging all the information listed above into an FHA mortgage loan calculator table to estimate the total monthly mortgage cost.
This is what the table for a mortgage calculator for an FHA loan might look like. You can use the table as a template or starting point to fill in the information, adjusting as needed, and then make your calculations.
Examples of FHA Loan Mortgage Calculations
Here are two examples of FHA loan calculations to give you an idea of how the process works. Keep in mind that there might be additional costs to consider, such as closing costs.
Example #1
- Loan amount: $200,000
- Interest rate: 3.5%
- Loan term: 30 years
- Annual property taxes: $2,500
- Annual homeowners insurance: $800
- Mortgage Insurance Premium (MIP) rate: 0.85%
First, calculate the monthly interest rate:
Monthly Interest Rate = 3.5% / 12 = 0.0029167
Next, calculate the monthly principal and interest:
Monthly Payment = ($200,000 * 0.0029167) / (1 – (1 + 0.0029167)^(-360)) Monthly Payment = $898.09
Then, calculate the annual and monthly Mortgage Insurance Premium (MIP):
Annual MIP = $200,000 * 0.0085 = $1,700. Monthly MIP = $1,700 / 12 = $141.67
Add property taxes and homeowners insurance:
Monthly Property Taxes = $2,500 / 12 = $208.33
Monthly Homeowners Insurance = $800 / 12 = $66.67
Calculate the total monthly mortgage costs:
Total Monthly Mortgage Costs = $898.09 (Principal & Interest) + $141.67 (MIP) + $208.33 (Property Taxes) + $66.67 (Homeowners Insurance) = $1,314.76
The total monthly mortgage cost per month is $1,314.76.
Example #2
- Loan amount: $150,000
- Interest rate: 4.0%
- Loan term: 15 years
- Annual property taxes: $3,000
- Annual homeowners insurance: $900
- Mortgage Insurance Premium (MIP) rate: 0.75%
First, calculate the monthly interest rate:
Monthly Interest Rate = 4.0% / 12 = 0.0033333
Next, calculate the monthly principal and interest:
Monthly Payment = ($150,000 * 0.0033333) / (1 – (1 + 0.0033333)^(-180)) Monthly Payment = $1,081.03
Then, calculate the annual and monthly Mortgage Insurance Premium (MIP):
Annual MIP = $150,000 * 0.0075 = $1,125. Monthly MIP = $1,125 / 12 = $93.75
Add property taxes and homeowners insurance:
Monthly Property Taxes = $3,000 / 12 = $250
Monthly Homeowners Insurance = $900 / 12 = $75
Calculate the total monthly mortgage costs:
Total Monthly Mortgage Costs = $1,081.03 (Principal & Interest) + $93.75 (MIP) + $250 (Property Taxes) + $75 (Homeowners Insurance) = $1,500.78
The total monthly mortgage cost per month is $1,500.78.
Reasons to Calculate Your FHA Loan Mortgage First
There are a number of reasons why it makes sense to calculate an FHA mortgage before you move forward with such a mortgage. Here are five ways calculating your mortgage can be helpful.
- Determining what’s affordable: Determining the cost of the mortgage can help borrowers search for a home within their price range.
- Financial preparation: Buyers can see how much money they should plan to spend each month. They can then create a budget and financial plan in order to be prepared to meet the monthly payments.
- Comparing loan options: Buyers can look at different loan options to choose the one that works best for them. They can also see how a different interest rate, home price, or down payment amount will affect their monthly cost.
- Preventing surprises: Using the calculator helps borrowers understand what the loan costs will be so they don’t get hit with expenses they weren’t expecting.
- Helping with negotiation: The more informed a buyer is about the various costs associated with the loan and the terms, the better they may be at negotiating the best terms.
Tips on How to Save on Your FHA Loan Mortgage
If you’re interested in getting an FHA mortgage, there are a few things you can do to help get the best deal for your situation.
Build your credit score. This is one of the tips to qualify for a mortgage that it’s good to know. Strengthening your credit may help you get better interest rate terms. Pay off your debts if you can, and pay your bills on time to help build your score.
Shop around for the best interest rate. Different lenders offer varying interest rates for FHA loans. See what you may qualify for. A higher credit score may help you get a better rate.
Consider making a higher down payment. This could potentially help make your overall mortgage amount and monthly payments lower.
Negotiate closing costs. Closing costs are typically 4% to 5% of the home’s purchase price. You may be able to negotiate with the lender to try to lower some of those costs.
Take advantage of down payment assistance programs. Many states and cities offer down payment assistance programs for first-time homebuyers.
Consider mortgage refinance when interest rates drop. If you get a lower rate when you refinance, you can typically reduce your monthly mortgage monthly payments.
The Takeaway
If you’re interested in an FHA loan, an FHA loan calculator can help you figure out the total costs of your loan and your monthly loan payments, which in turn can help you budget and plan for them. For instance, you’ll factor in such costs as homeowner’s insurance and Mortgage Insurance Premium.
Shopping around for the best interest rate and comparing different loan options may also help you save money on an FHA loan.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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Mortgage payments too high? Try these 6 tricks to get them down
A mortgage payment is a sum you typically pay every month, but it’s more than just a bill. It reflects an agreement between you and your lender that you have borrowed money to buy or refinance a home, and in exchange, you’ve agreed to pay back the sum with interest over time. If you fail to keep up with your payments, the lender may have the right to take your property.
There are typically four parts of your monthly payment: the loan principal, the loan interest (which is how the lender makes money), taxes, and insurance fees.
A mortgage payment may be a fixed rate, meaning your payment stays the same, month after month, year after year. Or it might be an adjustable rate, meaning the interest and therefore the payment can change at regular intervals.
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There are upsides and downsides to lowering your mortgage payments.
On the plus side, lowering your mortgage means you likely have more money to apply elsewhere. You might apply the freed-up funds to:
- Pay down other debt
- Build up your emergency fund
- Put more money towards retirement savings
- Use the cash for discretionary spending.
On the other hand, there are downsides to consider too:
- You might wind up paying a lower amount over a longer period of time, meaning your debt lasts longer
- You could pay more in interest over the life of the loan
- If a lower monthly payment means you are not paying your full share of interest due, you could wind up in a negative amortization situation, in which the amount you owe is going up instead of down.
(Learn more at Home Affordability Calculator)
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Now that you know a bit about how mortgage payments work and the pros and cons of lowering your mortgage payments, consider these ways you could minimize your monthly amount due.
1. Give Your Mortgage a Bonus
If you get a bonus or a windfall, consider throwing some of that money at your mortgage. If you are in a position to make a major lump-sum payment on your home loan, you may benefit from mortgage recasting.
With recasting, your lender will re-amortize the mortgage but retain the interest rate and term. The new, smaller balance equates to lower monthly payments. Worth noting: Many lenders charge a servicing fee and have equity requirements to recast a mortgage.
Other similar options:
- Make a lump-sum payment toward the mortgage principal (say, if you inherit some money or get a large bonus at work)
- Make extra payments on a schedule or whenever you can.
It’s a good idea to tell your lender that you want to put the extra money toward the principal and not the interest. Paying extra toward the principal provides two benefits: It will slowly reduce your monthly payment, and it will pare the total interest paid over the life of the loan.
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You could lower how much you pay out-of-pocket for your mortgage by bringing in rental income and putting it towards that monthly bill. You’re not lowering how much you owe, but you are using your home to bring in another income stream.
There are two common methods: “house hacking” (generating income from your property) and adding an accessory dwelling unit (ADU).
- House hacking can mean buying a two- to four-unit multifamily building for little money down and living in one of the units. Multi-family homes with up to four units are considered residential when it comes to financing. Owner-occupants may qualify for and opt for Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans, or conventional financing. Some people house-hack a single-family home, which just translates to having housemates or short-term rental guests.
- An ADU is another option for bringing in rental money to use towards your mortgage. This secondary dwelling unit on the same lot as a primary single-family home could be a detached cottage, a garage or basement conversion (that is, an in-law apartment or similar), or an attached unit.
With any planned addition or renovation to create an ADU, you might want to estimate return on investment — how much you’d charge and how long it would take to recoup the cash you put in before turning a profit.
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If your goal is to reduce your monthly payment — though not necessarily the overall cost of your mortgage — you may consider extending your mortgage term. For example, if you refinanced a 15-year mortgage into a 30-year mortgage, you would amortize your payments over a longer term, thereby reducing your monthly payment.
This technique could lower your monthly payment but will likely cost you more in interest in the long run.
(That said, just because you have a new 30-year mortgage doesn’t mean you have to take 30 years to pay it off. You’re often allowed to pay off your mortgage early without a prepayment penalty by paying more toward the principal.)
(Learn more at 15-Year vs 30-Year Mortgage: Which Should You Choose?).
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Mortgage insurance, which is needed for some loans, can add a significant amount to your monthly payments. Luckily, there are ways to eliminate these payments, depending on which type of mortgage loan you have.
- Getting rid of the FHA mortgage insurance premium (MIP). Consider your loan origination date that impacts when you can get rid of the extra expense of mortgage insurance:
- July 1991 to December 2000: If your loan originated between these dates, you can’t cancel your MIP.
- January 2001 to June 3, 2013: Your MIP can be canceled once you have 22% equity in your home.
- June 3, 2013, and later: If you made a down payment of at least 10% percent, MIP will be canceled after 11 years. Otherwise, MIP will last for the life of the loan.
Another way to shed MIP is to refinance to a conventional loan with a private lender. Many FHA homeowners may have enough equity to refinance.
- Getting rid of private mortgage insurance (PMI) If you took out a conventional mortgage with less than 20% down, you’re likely paying PMI. Ditching your PMI is an excellent way to reduce your monthly bill. To request that your PMI be eliminated, you’ll want to have 20% equity in your home, whether through your own payments or through home appreciation.
Thinking about starting a new home renovation project? Use this Home Improvement Cost Calculator to get an idea of what your project will cost.
Your lender must automatically terminate PMI on the date when your principal balance reaches 78% of the original value of your home. Check with your lender or loan program to see when and if you can get rid of your PMI.
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Here’s another way to lower your mortgage payments: Take a closer look at your property taxes. Your property taxes are based on an assessment of your house and land conducted by your county’s tax assessor. The higher they value your property, the more taxes you’ll pay.
If you think you’re paying too much in taxes, you can appeal the assessment. If you do, be prepared with examples of comparable properties in your area valued at less than your home. Or you may also show a professional appraisal.
To challenge an assessment, you can call your local tax assessor and ask about the appeals process.
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One of the best ways to reduce monthly mortgage payments is to refinance your mortgage. Refinancing (not to be confused with a reverse mortgage) means replacing your current mortgage with a new one, with terms that better suit your current needs.
There are a number of signs that a mortgage refinance makes sense, such as lower interest rates being offered or the desire to secure a fixed rate when you have an adjustable rate mortgage.
Refinancing can result in a more favorable interest rate, a change in loan length, a reduced monthly payment, and a substantial reduction in the amount you owe over the life of your mortgage. Do note, however, that there are often fees for refinancing your mortgage.
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If you’re serious about lowering your mortgage payments, consider these methods:
- Refinance to get a lower rate or other changes in your mortgage’s terms
- Apply a windfall (a tax refund, say, or a bonus) to your mortgage’s principal
- Reach enough equity in your home to drop mortgage insurance
- Make extra mortgage payments or higher mortgage payments (this can build equity or pay off the loan sooner, saving you interest)
- Ask about loan modification or forbearance programs if you are struggling to make payments.
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How to lower your mortgage payment? There are several possible ways. And who wouldn’t love to shrink their house payment? You might look at strategies to build equity and ditch mortgage insurance, extend the terms of your loan, or refinance to reduce your monthly payment.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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