How Much House Can You Afford to Buy With an FHA Mortgage?
October 9, 2023
New house hunters are sometimes unsure (at first) how much house they can afford. When you are doing the math using only the sale price of the home and an estimated interest rate, the results you get aren’t quite accurate.
And newcomers to the process may well wonder why that is. After all, the cost of buying a home boils down to a simple equation, doesn’t it?
Home Loan Math 101
What’s the difference between a more accurate estimate of your monthly mortgage and a complete guess? That depends on the quality of the data you bring to the equation and how much detail you have.
For example, the previously mentioned calculation of sale price and interest doesn’t really give you an accurate mortgage number because the variables, including mortgage insurance, financed closing costs, and property taxes, aren’t factored into the payment schedule.
You will need those estimated numbers to get closer to a reasonable estimate of how much you might pay each month.
Hidden Costs?
There are some expenses a newcomer might consider to be “hidden” costs. By this we mean things like homeowner association dues, which would be a requirement depending on whether you purchase a home governed by a Homeowner’s Association or HOA.
Another “hidden” cost is hazard insurance. Not all homeowners have to pay for it, naturally, but for those who live in known flood zones, areas with mudslides, or wildfire issues? The math can get more complicated.
Who to Ask for Help With Mortgage Cost Estimates
If you aren’t sure what costs might be waiting for you as a new homeowner, don’t despair. You can ask the seller what costs they currently pay for hazard insurance, property taxes, and HOA fees.
There is nothing wrong with asking for an estimate of these expenses since they directly affect how much you will pay monthly on your new home.
A seller who won’t be transparent about these costs might not be worth the negotiating time. You don’t have to be intrusive. Just ask for a basic idea of what to expect above and beyond the principal and interest on the loan.
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.
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RELATED VIDEOS:
Get to Know HUD
Using an FHA Loan Calculator
Living in a Single Family Home
And newcomers to the process may well wonder why that is. After all, the cost of buying a home boils down to a simple equation, doesn’t it?
Home Loan Math 101
What’s the difference between a more accurate estimate of your monthly mortgage and a complete guess? That depends on the quality of the data you bring to the equation and how much detail you have.
For example, the previously mentioned calculation of sale price and interest doesn’t really give you an accurate mortgage number because the variables, including mortgage insurance, financed closing costs, and property taxes, aren’t factored into the payment schedule.
You will need those estimated numbers to get closer to a reasonable estimate of how much you might pay each month.
Hidden Costs?
There are some expenses a newcomer might consider to be “hidden” costs. By this we mean things like homeowner association dues, which would be a requirement depending on whether you purchase a home governed by a Homeowner’s Association or HOA.
Another “hidden” cost is hazard insurance. Not all homeowners have to pay for it, naturally, but for those who live in known flood zones, areas with mudslides, or wildfire issues? The math can get more complicated.
Who to Ask for Help With Mortgage Cost Estimates
If you aren’t sure what costs might be waiting for you as a new homeowner, don’t despair. You can ask the seller what costs they currently pay for hazard insurance, property taxes, and HOA fees.
There is nothing wrong with asking for an estimate of these expenses since they directly affect how much you will pay monthly on your new home.
A seller who won’t be transparent about these costs might not be worth the negotiating time. You don’t have to be intrusive. Just ask for a basic idea of what to expect above and beyond the principal and interest on the loan.
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.
------------------------------
RELATED VIDEOS:
Get to Know HUD
Using an FHA Loan Calculator
Living in a Single Family Home
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