FHA Loan Calculator

Home Price 
Down Payment
Loan Termyears
Interest Rate%
Upfront FHA MIP%
Annual FHA MIP%
Annual FHA
MIP Duration

Property Taxes
Home Insurance/year
HOA Fee/year
Other Costs/year
Start Date
 

Monthly Pay:   $857.34

 MonthlyTotal
Mortgage Payment$857.34$308,641.98
Property Tax$200.00$72,000.00
Home Insurance$100.00$36,000.00
Annual MIP$136.71$49,215.00
Other Costs$250.00$90,000.00
Total Out-of-Pocket$1,544.05$555,856.98
 
House Price$200,000.00
Loan Amount with Upfront MIP$196,500.00
Down Payment$7,000.00
Upfront MIP$3,500.00
Total of 360 Mortgage Payments$308,641.98
Total Interest$112,141.98
Mortgage Payoff DateOct. 2051

*MIP: Mortgage Insurance Premium


Payments
 
Mortgage Amortization Graph


FHA loans are mortgages insured by the Federal Housing Administration, the largest mortgage insurer in the world. The FHA was established in 1934 after The Great Depression, and its continuing mission is to create more homeowners in the U.S. Therefore, it is plainly obvious that the popularity of FHA loans comes from their ability to extend mortgage loans to most people trying to buy a home. It is important to remember that the FHA doesn't lend money, but insures lenders instead.

Mortgage Insurance Premiums

To qualify, the FHA charges a single upfront mortgage insurance payment (MIP) along with annual mortgage insurance premiums. The mortgage insurance payments from borrowers are mandatory in order to protect lenders from losses in instances of defaults on loans. The upfront MIP is the same for all, which is 1.75% of the loan amounts and can be financed directly into the mortgage loans. The annual MIP varies based on the loan term, loan amount, and loan-to-value (LTV) ratio. Use the tables below to figure out proper MIP rates.

2021 FHA Annual MIP Rates

Loan Term—Longer than 15 Years

Loan AmountLTV RatioAnnual MIP Ratio
$625,500 or Less95% or Less0.8%
$625,500 or Lessmore than 95%0.85%
More than $625,50095% or Less1%
More than $625,500more than 95%1.05%

Loan Term—15 Years or Less

Loan AmountLTV RatioAnnual MIP Ratio
$625,500 or Less90% or Less0.45%
$625,500 or Lessmore than 90%0.7%
More than $625,50078% or Less0.45%
More than $625,50078% - 90%0.7%
More than $625,500more than 90%0.95%

Pros and Cons of FHA Loans

Like any financial product, FHA loans have pros and cons.

Pros

Not only do they have very appealing incentives for borrowers, but for certain mortgage lenders also; because they are a federal entity upheld by tax dollars, FHA loans basically guarantee the ability to take over any remaining loan payments when borrowers happen to default.

Cons

With as many benefits as they come with, there are reasons why they haven't been adopted as the universal method for mortgage loans.

As with any other big financial decision, take the time to evaluate all options. While FHA loans are a viable choice, conventional loans may be better for some people, such as when the down payment is over 20% or they have excellent credit scores. Veterans and similarly applicable individuals should consider VA loans. Compare rates offered by different lenders.

Home Affordability

The Department of Housing and Urban Development (HUD) is the organization that sets specific guidelines for FHA debt-to-income ratios and formulas used to manage the risk of each potential household that borrows FHA loans for home purchases. To determine the house affordability of an FHA loan, please use our House Affordability Calculator. In the Debt-to-Income Ratio drop-down selection, there is an option for FHA loan.

It becomes immediately apparent that FHA loans have the most stringent debt-to-income ratio requirements. After all, the FHA was essentially created to absorb the risk inherent in handing out many loans that could be defaulted at any time.

However, there are exceptions that can be made for borrowers who cannot adhere to the front or back-end ratios of 31% and 43%, respectively. The HUD can give mortgage lenders leeway to approve borrowers as long as lenders give evidence of significant compensating factors. One or more is typically sufficient to qualify borrowers. These compensating factors include:

Prepayment

There is no prepayment penalty for FHA loans, so it can make financial sense for some FHA borrowers to supplement an FHA loan with additional payments. However, we recommend it only when the financial situation allows for it, and our calculator can help. Inside the More Options input section of the calculator is an Extra Payments section to input monthly, yearly, or single payments. Use the results to see how much the length of the loan is cut short.

FHA 203K Loans

An FHA 203(k) loan allows borrowers to finance both the purchase and renovation of a primary residence or to finance the renovation of their existing home. Basically, it allows borrowers to buy and refinance a home that needs work and roll the renovation costs into the mortgage.

FHA 203k loans carry many of the same aspects as the regular FHA loan, such as ease of qualification for loans, high insurance premiums, and a small ongoing fee. The completion of improvements must be finished within six months. FHA loan funds are transferred into an escrow account and paid to contractors as improvements occur. A minimum of $5,000 must be borrowed and maximum limits are set by the FHA that differs according to locations. Similar to regular FHA loans, they tend to be enough for most families purchasing homes that aren't decked-out mansions. Funds can also be used for temporary housing while improvements are being made for up to six months.

There also exists a mini version of the FHA 203k called the Streamlined FHA 203k made specifically for lower borrowing amounts that are processed much more easily.