FHA Loan Calculator

FHA stands for "Federal Housing Administration". An FHA loan is a mortgage issued by the FHA through an approved lender, such as Ratetext. The Federal Housing Administration loan was created for low-to-moderate income borrowers to allow them the ability to get a payable mortgage. These types of loans require a lower minimum down payment, which is great for getting into a first home when you're in a lower income bracket. Use our FHA loan calculator to help you investigage if an FHA loan is for you.

Specs to Know

• FHA loans will require a down payment. With new changes in 2019, you can borrow up to 96.5% of the value of a home from an FHA-approved lender. This means that a 3.5% down payment is required to purchase the home.
• To qualify for an FHA loan, you must have a minimum credit score of 580 for normal mortgage rates. Buyers that fall below the 580 credit score, but that are still above 500 (so 500-579) may still be approved for an FHA loan, provided they make a 10% down payment.
• The federal government doesn't issue the loan to the home buyer. The FHA-loan is backed by the Federal Housing Administration but only offered through FHA-approved mortgage lenders, who issue the funds.
• FHA loans are offered in fixed-rate terms of 15 and 30 years.
• Buyers must pay FHA mortgage insurance when purchasing the loan. This cost should be calculated into the budget for the home when working with a lender.
• A buyer can't cancel their mortgage insurance premium unless they sell their home (that the loan was used for) or refinance into a non-FHA loan.
• Lenders of FHA loans are limited to charging no more than 3-5% of the loan amount for closing costs.
• There are various types of FHA loans. The most popular is the limited 203(k) loan and the standard 203(k) loan. The first has an easier application process. The second focuses more on improvements to a home. Reverse mortgages, energy-efficient mortgages and graduated payment mortgages are also options for your FHA loan, and a lender from Ratetext can help determine which one is right for you.

Should You Get an FHA Loan?

The federal government insures FHA loans, while conventional loans are not. Conventional loans come directly from a lending institution and typically require a higher credit score (around 620 or above) and a down payment between 3% and 20% of the home's cost. They offer loan terms ranging from 10 to 30 years, while FHA loans are limited to 15 or 30 years.

To qualify for an FHA loan, your front-end debt ratio (monthly mortgage payment) should not exceed 31% of your gross monthly income, and your back-end debt ratio (mortgage plus monthly expenses) should not exceed 43%. If you don't meet these requirements, we can help you find a plan that fits your budget.

If you have a lower credit score and prefer a lower down payment, an FHA loan might be the right choice for you. However, ensure you choose a lender approved by the FHA, like Ratetext.

If you're considering an FHA loan, we can help you determine your eligibility and calculate your potential loan amount.

FHA Loan Calculator

Use an FHA loan calculator to help you determine if you qualify. FHA loans require that you must meet certain criteria, including:

• A credit score over 500 to place a 10% down payment on the home, or a credit score over 580 to place a 3.5% down payment.
• Coming from a low-to-moderate income household.
• Using the loan for a first home/primary residence.
• First appraising the property by an FHA-approved lender, ensuring it meets the standards to apply for an FHA-backed loan.
• Being employed for at least the last 2 years and having a reliable source of income.
• Willing to pay monthly and annual insurance premiums for the loan.

If you qualify, the FHA loan requires that you pay two types of mortgage insurance premiums: the Upfront Mortgage Insurance Premium (UFMIP) and the Annual MIP. With the UFMIP, you will pay 1.75% of the home's value in closing costs. With the MIP, you will pay a monthly mortgage payment of 0.45% to 1.05% of your base loan amount. The exact percentage is determined by the lending institution based on various factors. Using our FHA loan calculator is a great way to assess your financial readiness and determine if this loan option is right for you.