September 18, 2024
How much house can you afford with an FHA loan? If you aren’t sure about the final amount of your monthly mortgage payment as a new house hunter, you aren’t alone. Fortunately, there are things you can do to get an estimate on how much to expect your monthly payments to be.
Do The Right Math
Don’t make the mistake of doing “the wrong math” for your FHA loan. You should not just use the home’s sale price and possible interest rate to make the calculation.
Why? The results you get don’t include other costs you may have to pay each month, and your expectations will be skewed (most likely) to be too low in terms of the actual monthly financial commitment.
Home Loan Math Variables
The previously mentioned calculation of sale price and interest doesn’t give you an accurate mortgage number since it omits certain variables, such as the amount of your monthly mortgage insurance payments, plus any financed closing costs and property taxes.
You will need those (estimated) numbers if you want a more accurate look at how much you might pay each month on an FHA home loan.
Not-So-Hidden Expenses Related To Your Home Loan
There are some expenses a newcomer might not see coming, but they are really by no means “hidden” costs.
They are expenses that are listed by name in your loan documents, but some borrowers don’t anticipate these expenses ahead of time.
We’re talking expenses such as homeowner association dues, a requirement for some borrowers depending on if the home is in a neighborhood organized by a Homeowner’s Association or HOA.
Another cost to anticipate in advance? Hazard insurance.
Whether or not you have to pay for it depends on whether the home is located in an area like a known floodplain, or wildfire zone. The math can get more complicated for borrowers who have to deal with hazard insurance, and you should ask about this issue early, depending on where you want to buy.
Ask For Help
Not sure which costs might apply to your FHA loan transaction? Try asking the seller what costs they currently pay on the home. Be sure to get details on any required hazard insurance, property taxes, and related costs.
Does the seller seem less than helpful in this area?
If you are trying to negotiate with someone who just won’t be transparent about these costs, it may be worth it to move on and look for another property.
But you may find the seller very willing to share what they pay, and that information can be useful for budgeting and planning your loan. It never hurts to ask.
You can also ask a loan officer or real estate agent what is typical in that housing market. You will still get an estimate only, but the numbers you come up with will get you closer to a realistic monthly budget for your home loan.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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