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Your monthly payment will be determined by the amount of your mortgage, the interest rate, and the length of the loan. A longer mortgage term will lower your monthly payment, but it will increase the total amount of interest you pay. For example, if you borrow $50,000 with an interest rate of 10 percent, your payment to principal and interest will be:
Monthly
| Term
| Total Payment
| $537.50
| 15 years
| $96,750
| $439.50
| 30 years
| $158,040
|
Applying for the Loan
When you have selected a lender, arrange a meeting with the loan officer to fill out the application forms. At the interview, you will have to provide the lender with your most recent bank statement and pay stub, picture identification, and proof of your social security number. You will also have to pay fees for an appraisal and a credit report.
The lender will take care of processing the loan for FHA insurance and will arrange to close the loan.
Many lenders are authorized to approve mortgage applications without submitting any paperwork to HUD. These companies are called Direct Endorsement lenders. Most FHA-insured loans are handled by these lenders. In some cases, however, HUD reviews information submitted by the lender and determines whether the property and the borrower are acceptable risks for an FHA-insured mortgage. Regardless of the type of loan you select, you will deal only with the lender, and the lender will handle all transactions with HUD.
Monthly Payments
The amount of your monthly payment will depend on how much money you borrow and the interest rate on your loan. Your monthly mortgage payment will include money to repay the principal amount you borrowed, the interest on that money, your FHA mortgage insurance premium, and amounts for taxes and property insurance. Typically, your combined monthly payment for principal, interest, taxes, and insurance should be no more than 29 percent of your gross (total) monthly income (before taxes).
Advance Payments
With an FHA-insured mortgage, you can make extra payments toward the principal when you make your regularly monthly payment. By making extra payments, you can repay the loan faster and save on interest. However, extra payments do not relieve you from continuing to make regular payments every month.
You can also pay off the entire balance of your FHA-insured mortgage at any time.
Limits on FHA-Insured Mortgages Amount of the Mortgage
There is a limit on the maximum mortgage HUD will insure. Generally, for a single family home, HUD insures mortgages up to $115,200. If you live in an area where the cost of housing is high, HUD may insure a mortgage up to $208,800. Information about the mortgage limits for the area you live in may be obtained from HUD-approved lending institutions or the local HUD Field Office.
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