FHA Loan Calculator
Results
Total Monthly Payment
Monthly Payment Breakdown
- Principal & Interest $0.00
- FHA MIP $0.00
- Property Tax $0.00
- Home Insurance $0.00
- HOA Fees $0.00
Loan Summary
- Base Loan Amount $0.00
- Upfront MIP $0.00
- Total Loan Amount $0.00
- Total Interest Paid $0.00
- Total Payments $0.00
What is an FHA Loan?
An FHA loan is a type of mortgage that is insured by the Federal Housing Administration (FHA), an agency within the U.S. Department of Housing and Urban Development (HUD). This government backing protects lenders against losses if a borrower defaults on their loan. Because of this reduced risk for lenders, FHA loans have more flexible and accessible qualification requirements compared to conventional mortgages. They are a popular choice, especially for first-time homebuyers, individuals with less-than-perfect credit, or those with a limited amount for a down payment.
The core purpose of the FHA loan program, established in 1934, is to make homeownership more attainable for a broader range of Americans. By lowering the financial barriers to entry, such as credit scores and down payment amounts, the FHA helps stimulate the housing market and provides opportunities for families who might otherwise be unable to secure financing.
FHA Loan Requirements
While FHA guidelines are generally more lenient than conventional loan standards, borrowers must still meet specific criteria to qualify. These requirements ensure that the borrower has the financial stability to handle a mortgage responsibly.
- Credit Score: To qualify for the minimum 3.5% down payment, a borrower typically needs a credit score of 580 or higher. If your credit score is between 500 and 579, you may still be eligible, but you'll likely need to provide a down payment of at least 10%. Lenders may also have their own additional requirements, known as "overlays."
- Down Payment: The minimum down payment for an FHA loan is 3.5% of the home's purchase price. The funds for this can come from savings, a gift from a family member, or a grant from a down payment assistance program.
- Debt-to-Income (DTI) Ratio: Your DTI ratio compares your total monthly debt payments (including the new mortgage) to your gross monthly income. Generally, FHA guidelines prefer a DTI ratio of 43% or less, but higher ratios may be approved with compensating factors like a higher credit score or significant cash reserves.
- Property Standards: The home you are purchasing must be appraised by an FHA-approved appraiser. The property must meet minimum health and safety standards to ensure it is a secure and sound investment.
- Stable Employment History: Lenders will want to see a consistent employment history, typically for the last two years, to verify a stable and reliable income.
FHA Loan vs. Conventional Loan
Choosing between an FHA and a conventional loan depends on your financial situation. A conventional loan is not insured by a government agency and often has stricter requirements.
- Credit Requirements: Conventional loans typically require a higher credit score, often 620 or more, to qualify for favorable terms. FHA loans are more forgiving of lower credit scores.
- Down Payment: While FHA's 3.5% minimum is well-known, some conventional loan programs allow down payments as low as 3%. However, qualifying for these low-down-payment conventional loans usually requires a very strong credit profile.
- Mortgage Insurance: This is a key difference. FHA loans require both an Upfront Mortgage Insurance Premium (UFMIP) and an Annual MIP. For most borrowers, the Annual MIP lasts for the entire loan term. Conventional loans use Private Mortgage Insurance (PMI) for down payments under 20%. A significant advantage of PMI is that it can be canceled once the borrower reaches 20% equity in their home.
- Loan Limits: Both loan types have limits, but they are determined differently. FHA loan limits are set by county, while conventional loan limits are set by the Federal Housing Finance Agency (FHFA). In high-cost areas, conventional "conforming" loan limits may be higher than FHA limits.
Understanding FHA Mortgage Insurance Premium (MIP)
Mortgage Insurance Premium (MIP) is mandatory for all FHA loans, regardless of the down payment amount. It's how the FHA funds the insurance program that protects lenders.
- Upfront MIP (UFMIP): This is a one-time premium, currently set at 1.75% of the base loan amount. Most borrowers choose to roll this cost into their total mortgage balance, so it doesn't have to be paid out-of-pocket at closing. Our calculator automatically adds this to the total loan amount.
- Annual MIP: Despite its name, this premium is paid in 12 monthly installments as part of your total mortgage payment. The rate can vary (our calculator defaults to a common rate of 0.55%), and the duration depends on your down payment and loan term. If you put down less than 10%, you will pay Annual MIP for the life of the loan. If you put down 10% or more, you will pay it for 11 years.
How to Use This FHA Loan Calculator
Our calculator is designed to be simple yet comprehensive. Follow these steps to get an accurate estimate of your mortgage payments:
- Home Price: Enter the purchase price of the home you're considering.
- Down Payment: Input your down payment amount. You can enter it as a percentage of the home price or as a specific dollar amount by clicking the '%' or '$' toggle.
- Loan Term: Select the length of your mortgage, typically 15 or 30 years.
- Interest Rate: Enter the annual interest rate you expect to receive from a lender.
- Annual Property Taxes & Home Insurance: Provide annual estimates for these costs. You can often find tax information on county websites or real estate listings. A common estimate for insurance is 0.5% of the home price.
- Monthly HOA Fees: If the property is in a homeowners association, enter the monthly fee. Leave this blank if it doesn't apply.
- MIP Rates: The calculator pre-fills the standard FHA Upfront (1.75%) and Annual MIP rates. You can adjust these if your lender provides different figures.
- Calculate: Click the "Calculate" button to see a detailed breakdown of your loan, including your total monthly payment, loan summary, and visual charts.
Frequently Asked Questions
What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD). This insurance protects lenders from losses if a borrower defaults on their loan, making it easier for individuals with lower credit scores or smaller down payments to qualify for a home loan.
How does an FHA loan differ from a conventional loan?
The main differences are in the qualification requirements and mortgage insurance. FHA loans typically have more lenient credit score and down payment requirements (as low as 3.5%) but mandate both upfront and annual mortgage insurance premiums (MIP). Conventional loans often require higher credit scores and larger down payments (though some programs allow as low as 3%), and their private mortgage insurance (PMI) can often be canceled once you reach 20% equity in your home.
What is FHA Mortgage Insurance Premium (MIP)?
FHA Mortgage Insurance Premium (MIP) is a mandatory insurance policy for FHA loans. It comes in two parts: an Upfront MIP (UFMIP), which is a one-time fee typically rolled into the loan amount, and an Annual MIP, which is paid in monthly installments for a set period (often the life of the loan).
How does the down payment affect an FHA loan?
The down payment amount directly impacts your loan amount and mortgage insurance. A higher down payment reduces the total amount you need to borrow, lowering your monthly principal and interest payments. If you put down 10% or more, your annual FHA MIP will only be required for 11 years, instead of the entire loan term, saving you a significant amount of money over time.
Are there loan limits for FHA loans?
Yes, the FHA sets maximum mortgage amounts that it will insure for a given area. These loan limits vary by county and are updated annually. They are typically set at 115% of the median home price in a specific area, subject to a national floor and ceiling. You cannot borrow more than the FHA limit for your county, even if you are approved for a higher amount.
Who qualifies for an FHA loan?
To qualify for an FHA loan, borrowers generally need a minimum credit score (typically 580 for a 3.5% down payment, or 500-579 for a 10% down payment), a steady employment history, a debt-to-income ratio that meets FHA guidelines (usually under 43%), and the property must meet FHA's minimum appraisal standards for safety and livability.
