Not everyone applying for an FHA (Federal Housing Administration) insured loan is a first-time home buyer, but this is one of the more popular mortgage products for this group of prospective home buyers.
As first-time home buyers often have limited experience in the cost of homeownership, using an FHA loan calculator is an effective exercise in planning for the purchase and ensuring the monthly loan payments, insurance and the cost of the loan over the term can be maintained without financial stress.
What To Consider
When using any FHA loan calculator, there are several variables to consider. The more accurate and realistic the home buyer can be with the information, the more value that can be obtained from reviewing the results.
While an FHA loan is possible with a down payment as little as 3.5% with a qualifying credit score of at least 580, there are significant points to be made for boosting this to 5 or even 10 percent if possible.
Considering the typical FHA loan is taken as a 30 year fixed mortgage, paying 10% of the value of the home up front will decrease monthly costs by hundreds of dollars a month, even on a modest home purchase. A hundred dollars a month over the 360 payments is a large sum of money that can be saved.
Additionally, try different interest rates on the FHA loan calculator to see how they also impact the long-term cost of the loan as well as the monthly payment. For some buyers, waiting for a few months and working on their credit score to increase the score will also have important long-term financial benefits.
The best calculators are free to use and will include information on the breakdown of the payment per month. Remember, with the FHA loan there is an insurance payment required as well, which should be included in the loan payment summary by month.
Take advantage of the free online FHA loan calculator offered by Guaranteed Rate to consider your borrowing options.
