When you are considering purchasing your first home, you often do not know where to turn. There is a significant amount of information available about loans and often, this information is contradictory or confusing. One of the biggest questions for first-time home buyers is how much they can afford to pay for a home. This is one reason why an FHA mortgage calculator may be the best tool you can use before you start hunting for a home.
Why the FHA mortgage calculator?
Typically, a first-time home buyer would like to put down as little as possible when purchasing a home. This is one reason why so many borrowers turn to the FHA for their mortgage. However, even if a borrower has a larger down payment, the terms of most FHA loans offer more favorable interest rates. Additionally, FHA also allows a borrower to have higher debt to income ratios than traditional mortgage loans. For example, most underwriters for a traditional bank would require a borrower have no more than 31 percent of their income dedicated to debt, including the debt incurred with a new mortgage, while the FHA expands this to 41 percent.
While an FHA mortgage has restrictions that traditional lenders may not impose, they offer borrowers far more flexibility in terms of debt to income ratios as well as more flexible credit qualification. This is not to say that borrowers with poor credit can qualify, it simply means more borrowers have access to the money they need to purchase a home.
Understanding the FHA mortgage calculator
An FHA mortgage calculator allows a borrower to determine what their anticipated mortgage payment is based on home price. There are limits as to how much the mortgage may be based on the community limits where you are purchasing. The limits are adjusted on a regular basis and are dependent on median price for the specific area. Borrowers using a calculator often have a better idea of what they are getting themselves into financially.
Borrowers should be prepared with specific information including an appraised value of the home, mortgage insurance premium amounts and the sales price of the home. There are other factors that must be entered in order to obtain an accurate number but the overall purpose of the calculator is to give borrowers an idea of how much their mortgage payment will be on a monthly basis.
Understanding the benefits
An FHA mortgage calculator takes many factors into consideration, borrowers will know ahead of time exactly how much money they can afford to borrow. This means the new home buyer will know how much money they need to have for a down payment, how much the purchase price of the homes they should be pursuing and approximately how much their mortgage payment will be.
Those who are considering buying a home should have as much information as possible before they start shopping for a home. Few things are more frustrating than finding a home and being unable to qualify for a mortgage because you do not have a large enough down payments or you are not making enough money to support the debt.
An FHA mortgage calculator can help potential buyers shop for a home that is within their means and feel confident they have the ability to get approved for a loan. The FHA program was designed to help lower and middle class families afford a home and when you work with a mortgage company that has the experience and skills necessary to evaluate your application, you will have the information you need to be an informed borrower.