FHA Mortgage Calculator

FHA Mortgage Calculator with PMI and taxes is a tool to calculate your FHA mortgage payment.FHA home loan calculator has options to calculate property tax, home insurance, payment frequency (monthly and bi-weekly), monthly HOA fees, and extra payments. The FHA amortization calculator will show a summary of the mortgage and a breakdown of each monthly payment.

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FHA Loan Calculator with PMI and Taxes

The FHA Loan Calculator with PMI and taxes is easy to use with breakdowns of every payment showing in the mortgage amortization schedule with monthly and biweekly payment options. The FHA amortization calculator also offers extra payment options that show you how much faster you can pay off the mortgage if you are making regular extra payments. The extra payment can be a one time payment, yearly, quarterly, or every payment (monthly or biweekly).

FHA Home Loan Calculator

The FHA mortgage calculator with taxes and insurance includes options for upfront and annual MIP. For conventional loans, there is an insurance called private mortgage insurance or PMI when your down payment is less than 20%. For FHA mortgages, there is something similar to PMI called the one time upfront MIP and Annual MIP. The one time upfront MIP is currently 1.75% of your base mortgage amount, and your final mortgage amount is equal to the base mortgage amount plus the one time upfront MIP. The rules on how to calculate Annual MIP is based on the base loan amount and loan-to-value or LTV ratio. The calculation changes over the years and is very complex. To keep the FHA loan mortgage calculator easier to use and understand, the calculator will simply ask you for an annual MIP and the cost will show up on every payment in the mortgage amortization schedule. Currently, the annual MIP rate is 0.85% for a 30 year mortgage and 0.45% for 15 year mortgage. The calculator should really be called the FHA mortgage payment calculator with MIP and taxes instead of PMI.

What is an FHA loan?

FHA loans are Federal Housing Administration mortgages backed by the government. It was created by the government to help first-time buyers with lower credit scores and down payments who can't afford conventional mortgages. FHA loans are popular especially for first-time buyers because they are designed for low to mid-income borrowers and the requirements are lower compared to conventional loans. Although FHA loans are insured by the government, they are actually offered by lenders who were approved by the Federal Housing Administration.

How do FHA loans work?

FHA loans are fixed interest rate mortgages with 15 and 30-year terms. While conventional mortgages require a large down payment and a good credit score, FHA loans have much lower requirements, anyone with a credit score of 580 may be qualified and it only requires a 3.5% down payment. In other words, you can borrow up to 96.5% of the value of your house with an FHA loan. However, there is one downside to FHA loans. That is FHA loans require borrowers to pay FHA mortgage insurance. The mortgage insurance to protect the lender to recoup losses in case the borrower defaults.

Whereas conventional mortgages require borrowers to pay a PMI, or private mortgage insurance when borrowers make a down payment that is less than 20%, the FHA loan requires borrowers to pay two mortgage insurance premiums.

• Upfront mortgage insurance - also known as MIP, is a one-time payment that borrowers need to pay when they get the loan. The MIP is 1.75% of the loan amount and the borrowers have the option to roll this fee into their mortgage.


• Annual mortgage insurance - is a premium with an annual rate of 0.45% to 1.05% of the loan amount depending on the mortgage terms, down payment, and how much you are borrowing. Borrowers will pay this annual mortgage insurance monthly.

For example, if you are getting a mortgage of $100,000, your MIP fee will be $1,750, and the annual mortgage insurance will be in the range of $450 to $1,050 each year. Since you are paying monthly for the annual mortgage insurance, it will cost you about  $37.50 to $87.50 each month. Borrowers will pay off the annual mortgage insurance in 11 years if their down payment is at least 10% where their LTV is less than 90%, those who put down less than 10% will continue to pay the annual mortgage insurance for the life of the loan.

Types of FHA loans

There are 5 types of FHA loans.

• Traditional Mortgage - a mortgage for a primary residency.


• Home Equity Conversion Mortgage (HECM) - a reverse mortgage for homeowners age 62+ with significant equity in their home to exchange equity for cash.


• 203(k) Mortgage - helps borrowers to buy a house and make home improvements all within the same mortgage program.


• Energy Efficient Mortgage (EEM) - helps borrowers to buy a house with extra funds to install energy efficient equipment intended to lower their utility bills.


• Section 245(a) Loan - is a Graduated Payment Mortgage (GPM) intended for borrowers who pay lower initial monthly payments and increase gradually as they expect their income to rise over time.

Pros and cons of FHA loans

Following are the pros and cons of FHA loans compared to conventional loans.

Pros

• Lower Down Payment - Down payment as little as 3.5% if your credit score is at least 580.


• Lower Credit Score - If your credit score is below 580, you can still get an FHA loan if you put in at least a 10% down payment. Most conventional mortgage lenders required a minimum credit score of 620.


• Higher DTI - Debt to income ratio as high as 50%. Most convention lenders do not accept borrowers with DTI over 43%.

Cons

• Higher mortgage insurance- The one-time mortgage insurance or MIP of 1.75% is required regardless of your down payment whereas conventional mortgage doesn't require mortgage insurance if your down payment is at least 20%. For FHA loans, the annual mortgage insurance lasts 11 years if your down payment is at least 10%, and the whole loan term if your down payment is less than 10%. For a conventional mortgage, borrowers stop paying for private mortgage insurance once their equity in the house exceeds 20%, or LTV less than 80%.


• Houses must meet higher safety requirements - Strict government rules for FHA housing where the house must meet health and safety standards.


• Primary residence only - home purchase for primary residence only, you can't use FHA loans for investment purposes.

Should I get an FHA loan?

While FHA loans have a lower standard than conventional mortgages and are easier to get, most people end up paying more on interest and mortgage insurance. Whether you should get an FHA loan depends on a few factors.

• Is your credit score good? - If you have a credit score above 620 and can afford the down payment for a conventional mortgage, you may not want to get an FHA loan. Some conventional lenders accept a minimum 3% down payment if your credit score is in the high 600's. If your credit score is around 580, you can consider an FHA loan, but then you will probably need to pay a higher interest rate. If your credit score is below 580, you will need to put down at least 10% for FHA loans.


• Can you afford the 10% down payment? - If you can afford a 10% down payment with a decent credit score, you may try to get a conventional mortgage. With a conventional mortgage, you only have to pay the PMI or private mortgage insurance until your equity exceeds 20%, whereas an FHA loan requires you to pay the mortgage insurance for at least 11 years. If you put down less than 10% for an FHA loan, then you will have to pay the mortgage insurance for the life of the loan.


• DTI - Is your debt to income ratio above 43%? Most conventional mortgage lenders don't approve borrowers with a DTI ratio above 43%. The DTI standard for FHA loans is 50%. If your DTI ratio is above 43%, but below 50%, you can qualify for an FHA loan.

The bottom line is that the interest rate is usually lower for conventional mortgages, if you qualify for a conventional mortgage, go for it.

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