Between raising their kids on their own and trying to pay all the bills, life can be pretty hard for a single mother. Further, buying a house is almost an unachievable target. However, it doesn’t have to be that way anymore. There are plenty of assistance programs that can help make this dream come true for single mothers.
If you are a single parent with decent credit, then you can qualify for an FHA home loan. An FHA loan is a mortgage product that is insured by the Federal Housing Administration. This is a loan that requires a very small down payment as compared to other mortgage loans from the bank. It also has low closing costs and is best for customers who wouldn’t qualify for a conventional mortgage.
You will be required to provide a down payment of at least 3.5% for the mortgage. This makes it possible for people who are in the middle and low-income ranges to buy houses they do not qualify for under normal circumstances. In this review, we will look at how you can simulate this loan for yourself online.
How To Calculate The FHA Loan Monthly Payments
This loan allows you to have lower payments and they also have relaxed credit qualifications. In order to calculate your monthly repayments, however, one must consider the following questions.
How long are you willing to live in the house? Is it going to be your starter home or your forever home? These questions help determine the number of years you will be repaying the loan. The maximum amount is usually 30 years, but the longer the timeline, the higher the interest. A 15-year loan is good, but this will increase your monthly payments.
Should you take an adjustable rate or not? This is yet another question you must answer when applying for an FHA loan. For example, if you choose a 5/1 FHA ARM loan, then this will give you a much lower initial interest rate which is fixed for 5 years. After that, there will be annual changes. This is a great option for buyers who wish to stay in the house for only a few years
How much is the down payment? This will guide you on how much you should put down before the mortgage goes through. As we mentioned earlier, FHA loans require a 3.5% down payment, which means that, if you wish to buy a home worth $250,000, then you must come up with at least $8,500 as the down payment. If you happen to have more than that, you could always go for a 10% down payment, as this will cause your premiums to be much lower.
Understanding The Costs
This is the amount you will owe for the loan. For example, if you were buying a house worth $250,000 and you made a down payment of let’s say $20,000, then your principal amount would be $230,000.
Interest refers to the cost of the loan. Each lender expects to make some money from the money they lend, so they charge interest for all loans. Depending on your credit score, the mortgage interest rates can be high or low.
You should expect to pay annual taxes on your new home. These taxes are usually assessed by a government authority and are often collected together with your payment. You should remit this to an escrow account each year.
This cost is basically built into the loan. You will be required to make an upfront premium payment when closing on the deal, and it will also be factored into other ongoing premiums. Here’s a tip: Because FHA loans require only 3.5% down payment, you will end up paying the insurance payments for the life span of the loan. However, if you put up more than 10% down, you will stop the premium payments after only 11 years.
Homeowner’s Association Fee
This may, or may not be included in your monthly premiums. The HOA fee is usually decided by the homeowner’s organization in the neighborhood of your home, and all the neighbors basically chip in for improvements on all the shared amenities. It is important to know beforehand how much will be required of you.
Can The Monthly Installments Be Lowered?
If you notice that the loan repayments are too high, you could request the lender to extend the loan terms. This can be done even if you have already started paying for the mortgage. A longer term will essentially lower your monthly installments. Also, you could renegotiate your interest rate so you can get a lower rate.
Owning a house is a great achievement and most people endeavor to do so. Look around before settling on one lender, so you can ensure you have the absolute best rates and loan terms that will make your life easy as you repay the loan.