Variables That Affect the Cost of Your FHA Home Loan

October 24, 2018

Many house hunters want to know what the costs of the home loan will be. They want to anticipate these expenses in the budgeting and planning stages of the home loan and try to pay for more up front.

Barring that, some borrowers want to at least determine how adding some expenses to the FHA loan (such as the FHA Up-Front Mortgage Insurance Premium) might affect the overall cost of the loan.

There are variables that will affect how much your loan costs. Here are some (not all) of the most important ones.

FHA Home Loan Interest Rates

The total cost of your home loan will depend greatly on the interest rate. Home loan interest rates can fluctuate daily and until the borrower and lender agree to an interest rate lock those changing rates will be a potential issue for the home buyer.

The mortgage loan interest rate lock commitment is designed to protect the borrower from interest rate changes for a specified period of time, but rate lock commitments may also cost money-the rate itself AND any amount your lender charges for the commitment will vary depending on the housing market, state law, or other factors.

You FICO scores and other credit data will affect the interest rate offered to you by the lender-the most competitive FICO scores get more competitive interest rates on their home loans.

FHA Home Loan Appraisal Fees

FHA appraisals do not have a single, across-the-board cost nationwide. The amount you pay for the appraisal will depend on what is considered customary for the area. It’s a good idea to ask a real estate agent or participating FHA lender what the estimated cost of an appraisal would be for your transaction.

FHA Mortgage Insurance Premiums

The amount of the Up-Front Mortgage Insurance Premium (UFMIP) and the monthly cost of your FHA Mortgage Insurance Premium (MIP) will vary because these are based on the price of the home, the term of the loan, and other factors.

Property Tax Rates

The amount of property tax you pay is a variable that affects your home loan budget; these taxes are not consistent nationwide and you may find that some areas not only charge more property taxes than others, but that those taxes routinely increase due to bond issues or other local legislation.

It is a very good idea to discuss property taxes with a real estate agent or someone who knows the local housing market well to determine what  you should expect in the first years of owning your new home.

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