FHA Loan Calculator
Free FHA loan calculator. Calculate monthly payments including upfront and annual MIP, see total cost, and compare with conventional loans.
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FHA Loans Explained: Who They're For and How They Work
FHA (Federal Housing Administration) loans are government-backed mortgages designed for borrowers who may not qualify for conventional financing. The key advantages: lower credit score requirements (580 minimum for 3.5% down, 500-579 with 10% down), lower down payment (3.5% vs 5-20% conventional), more lenient debt-to-income ratios (up to 50% in some cases vs 43% conventional), and acceptance of gift funds for the entire down payment. FHA loans are particularly popular with first-time homebuyers — approximately 83% of FHA purchase loans go to first-time buyers.
The trade-off: FHA loans require mortgage insurance premiums (MIP) — both an upfront premium of 1.75% of the loan amount (financed into the loan) and an annual premium of 0.50-0.55% paid monthly. On a $290,000 loan: upfront MIP is $5,075 (financed), and monthly MIP is approximately $121-$133/month. Unlike conventional PMI which drops off at 80% LTV, FHA MIP lasts the entire life of the loan if your down payment is less than 10%. This is the primary reason many buyers refinance out of FHA into conventional once they have 20% equity. Compare your options with our VA Loan Calculator and Mortgage Calculator.
FHA vs Conventional: Making the Right Choice
The decision between FHA and conventional depends on your credit score and down payment. Choose FHA if: your credit score is below 680, you have limited savings for a down payment, your debt-to-income ratio is above 43%, or you have had a recent credit event (bankruptcy, foreclosure) — FHA allows shorter waiting periods. Choose conventional if: your credit score is 680+, you can put 10-20% down, you want to avoid lifetime MIP, or you are buying a higher-priced home (FHA has loan limits by county).
A critical comparison: on a $300,000 home with 3.5% down, the FHA loan has a lower interest rate (~0.25% less) but adds $5,063 in upfront MIP + $121/month ongoing MIP. Over 5 years, the FHA borrower pays approximately $12,300 in MIP alone. A conventional borrower with PMI at the same down payment pays roughly $8,500 in PMI over the same period — and the PMI automatically drops off at 78% LTV. For buyers planning to stay long-term, the conventional loan is usually cheaper despite the higher rate. For buyers planning to refinance within 3-5 years, FHA can be advantageous due to the lower rate. Calculate closing costs for both options with our Closing Cost Calculator.