FHA Loan Calculator

What this calculator does

An FHA loan is what lets a lot of people buy a first home with far less saved up than a normal mortgage demands, as little as 3.5 percent down. The trade for that easier door is mortgage insurance, and it comes in two parts that plain mortgage calculators tend to skip.

This calculator puts them front and centre. You enter the home price, your down payment, the term, the rate, and the annual insurance rate, and it works out your down payment, the base loan, the upfront insurance premium, your monthly loan payment, the monthly insurance on top, and the total. Since the FHA loan is a United States government program, all the figures here are in US dollars.

How to use it

1. Home price. The purchase price of the home.
2. Down payment percentage. The share you pay upfront. FHA allows as little as 3.5 percent for eligible buyers.
3. Loan term. The length of the mortgage in years, usually 30 or 15.
4. Interest rate. The annual rate on the loan, as a percent.
5. Annual MIP. The yearly mortgage insurance rate. For most borrowers this is currently 0.55 percent, though it ranges depending on your loan size, term, and down payment.

Press Calculate for the full breakdown, or Reset to clear it.

What an FHA loan is

FHA stands for the Federal Housing Administration, part of the US Department of Housing and Urban Development. Here is the key thing to understand: the FHA does not lend you the money. It insures the loan. A regular lender gives you the mortgage, and the FHA promises that lender it will be covered if you cannot repay.

That insurance is what changes the deal for you. Because the lender's risk is covered, it can say yes to buyers a conventional loan would turn away, accepting smaller down payments and more forgiving credit. You get access to a mortgage you might not otherwise reach. In return, you pay for the insurance that made it possible, and that cost is the heart of what this calculator shows.

The two mortgage insurance costs

FHA mortgage insurance is not one charge but two, and they work differently.

The upfront premium, UFMIP. This is a one-time charge of 1.75 percent of your base loan amount, set by the FHA and the same for nearly every borrower regardless of term or down payment. You do not usually pay it in cash at closing. Most borrowers roll it into the loan, which means it gets added to the balance and you pay it off, with interest, over the years.

The annual premium, MIP. This is the recurring one, charged every year as a percentage of the loan and collected in twelve monthly slices inside your mortgage payment. For most borrowers it currently runs at 0.55 percent a year, though the FHA sets it on a range from 0.15 to 0.75 percent depending on your loan size, term, and how much you put down. This is the piece that sits in your monthly payment for years.

How the monthly cost is built

The calculator assembles the figure in a few clean steps:

1. Your down payment is the home price times the percentage you put down.
2. The base loan is the home price minus that down payment.
3. The upfront premium is 1.75 percent of the base loan.
4. Your monthly loan payment is worked out on the base loan with the standard amortized payment formula, using the rate and term.
5. The monthly insurance is the annual MIP rate on the loan, divided by twelve.
6. Your total monthly payment is the loan payment plus the monthly insurance.

One honest note on the upfront premium. The calculator shows it as a separate figure and works the loan payment out on the base loan. If you roll that premium into the balance, as most borrowers do, you also pay interest on it, so your real monthly payment lands a little above the base figure shown here. It is a small amount, but it is worth knowing it is there.

A worked example you can check

Say you are buying a $300,000 home with 3.5 percent down, over 30 years, at 6.5 percent, with the common 0.55 percent annual MIP. Let us run it.

• Down payment: 3.5 percent of $300,000 = $10,500
• Base loan: $300,000 minus $10,500 = $289,500
• Upfront premium, UFMIP: 1.75 percent of $289,500 = $5,066.25
• Monthly loan payment, principal and interest: $1,829.84
• Monthly insurance: 0.55 percent of $289,500, divided by 12 = $132.69
• Total monthly payment: 1,829.84 plus 132.69 = $1,962.52
• Total FHA loan, base plus upfront premium: $294,566.25

So on paper your loan payment is $1,829.84, but your real monthly cost is $1,962.52 once the insurance is added, about $133 more every month. Over a 30 year term that insurance adds up to a serious sum, which is exactly why it deserves to be visible from the start, not buried.

How long you pay the insurance

This is the detail that surprises people, so here it is clearly. On most FHA loans, the annual insurance does not fall away once you have built up equity the way private mortgage insurance on a conventional loan does. How long you pay depends on your down payment:

• Put down less than 10 percent, and the insurance stays for the life of the loan.
• Put down 10 percent or more, and it drops off after 11 years.

Since most FHA buyers put down the minimum 3.5 percent, they fall into the first case, paying the insurance for as long as they hold the loan. The common way out is to refinance into a conventional loan once you have around 20 percent equity in the home, which ends the FHA insurance entirely. If you plan to keep an FHA loan for the long haul, factor that ongoing insurance into your thinking, because it is a cost that does not expire on its own.

What the monthly figure leaves out

The total here covers your loan payment and the FHA insurance. A real monthly housing cost carries more:

• Property taxes, which vary by location and home value.
• Homeowners insurance, which lenders require.
• Any homeowners association dues, if the property has them.

Lenders usually collect taxes and insurance alongside your payment in an escrow account, so your actual monthly outgoing is higher than the loan-plus-MIP figure this calculator shows. Use this to understand the loan and its insurance clearly, then add your local taxes and insurance to see the whole payment.

The assumptions behind the number

• The interest rate is fixed for the whole term.
• The upfront premium is 1.75 percent of the base loan, the standard FHA rate.
• The loan payment is worked out on the base loan, not including the upfront premium if you finance it.
• The annual insurance rate you enter stays the same across the term.
• Property taxes, homeowners insurance, and association dues are not included.

FHA rules and rates change, and your exact premium depends on your loan's specifics, so treat this as a solid estimate. Your lender's figures, and current FHA policy, are the binding word.

Questions people ask

How little can I put down on an FHA loan?

As little as 3.5 percent for eligible borrowers, which is the main reason these loans exist. That low bar is part of what the mortgage insurance pays for.

Do I have to pay the 1.75 percent upfront in cash?

Usually not. Most borrowers roll the upfront premium into the loan balance, so it is paid off over the years rather than at closing. The trade is that you pay interest on it.

Can I ever stop paying the annual insurance?

If you put down 10 percent or more, it ends after 11 years. If you put down less, it stays for the life of the loan, and the common way to end it is to refinance into a conventional loan once you have enough equity.

Is an FHA loan cheaper than a conventional one?

Not always. FHA is easier to qualify for with a low down payment, but the two insurance costs can make it more expensive over time than a conventional loan with mortgage insurance you can cancel. It depends on your down payment, credit, and how long you keep the loan.

References

The FHA insurance figures, the 1.75 percent upfront premium, the annual premium range, and how long it is paid, follow the US Department of Housing and Urban Development's FHA Single Family Housing Policy Handbook. The monthly loan payment uses the standard amortized loan formula, the present value of an annuity solved for the payment, as derived in OpenStax's Principles of Finance. The point that your true cost of borrowing includes insurance and fees, not just the note rate, reflects the US Consumer Financial Protection Bureau's treatment of the interest rate versus the APR.

1. U.S. Department of Housing and Urban Development, FHA Single Family Housing Policy Handbook 4000.1. https://www.hud.gov/hud-partners/single-family-handbook-4000-1
2. OpenStax, Principles of Finance 2e, Section 8.3, Loan Amortization. https://openstax.org/books/principles-of-finance-2e/pages/8-3-loan-amortization
3. U.S. Consumer Financial Protection Bureau, What is the difference between a loan interest rate and the APR? https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/