The primary purpose of the FHA loan is to ensure a roof above anyone who has low credit scores. As the first-time homebuyers struggle to come up with a down payment, a 3.5% down payment is quite helpful. The interest rates are higher even if your credit score is lower than 620. When you are looking to purchase a house, the government-backed FHA mortgage proves to be useful. But there is one thing to consider before diving into the process. You should figure out how much you can afford, and it is only possible with a loan calculator.
The mortgage has low closing costs and less-stringent lending standards for the borrowers who can apply for a conventional home loan. People who fall into the category of lower- or middle-income buyers cannot meet the strict requirements laid out by conventional loans. It is true that first-time homebuyers face difficulties in securing at least 650 credit scores. So, before you jump into the process, here’s a few important information about FHA loan calculator Texas.
Using an FHA Calculator in Texas
A calculator is an online tool that requires the borrower to enter the essential information. By filling out the parameters, you can check the costs of the mortgage and the mortgage insurance premium. So, the first thing to put is how much you are willing to spend and how much you can afford. For example, you have mentioned $200,000 for both fields and you are going for 10% down payment. If you have selected a 30-year fixed-rate mortgage with a 4.9% interest rate, the entire cost (including insurance, taxes, interest, and principal) would be $460,903. Additionally, the whole monthly cost would be $1,292. If you are aiming for a 15-year loan, the monthly cost would be $1,736 and the entire cost would be $330,543. You can apply for 3.5% down payment only if your credit score is more than 579.
Why Do You Need FHA Mortgage Insurance Premium?
Since the mortgage insurance premium has been added to the total cost, you might wonder if you need it. The first thing to remember – MIP or mortgage insurance premium is the extra amount you are going to pay in case the loan goes on default. The FHA borrowers are bound to pay for two mortgage insurance premiums including paying upfront at closing and paying yearly over the loan term. So, the former or paying upfront is almost 1.75% of the mortgage. Then the yearly MIP ranges between 0.45% and 1.05% of the mortgage amount. You should also remember that you cannot cancel the mortgage insurance premium if you are an FHA loan-holder.
You can also inquire about the FHA loan limits that vary based on the property type and location. If you are having trouble to figure out the limits, a professional lender can offer the required help. So, it is essential to seek a lender who can guide how the loan calculator works. Of course, do not forget to check online reviews before choosing the right lender!
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.