A typical FHA loan payment includes principal and interest on the loan balance, mortgage insurance premiums, monthly homeowners insurance fees, and monthly property taxes. FHA homeowners in a condo or PUD will also have to pay homeowners association (HOA) dues every month.
Yes, you have to pay closing costs on an FHA mortgage just like any other loan type. FHA loan closing costs are close to conventional closing costs: about 2-5% of the loan amount depending on your home price and lender. FHA also charges an upfront mortgage insurance fee equal to 1.75% of the loan amount. Most borrowers roll this into the loan to avoid paying it upfront. But if you choose to pay upfront, this fee will increase your closing costs substantially.
Unlike conventional mortgages, FHA loans do not waive mortgage insurance when you put 20% down. All FHA homeowners are required to pay mortgage insurance regardless of down payment — though if you put at least 10% down, you’ll only pay it for 11 years instead of the life of the loan. If you have 20% down and a credit score above 620, you’re likely better off with a conventional loan because you won’t have to pay for PMI.
Home buyers must put at least 3.5% down on an FHA loan. That’s because FHA’s maximum loan-to-value ratio is 96.5% — meaning your loan amount can’t be more than 96.5% of the home’s value. By making a 3.5% down payment, you push your loan amount below FHA’s LTV threshold.
FHA sets loan limits for each county, which dictate the maximum amount borrowers can qualify for via the FHA program. Loan limits are higher in areas with high-cost real estate, and borrowers purchasing 2-4-unit properties can often get a larger loan amount than those buying single-family homes. Not all borrowers will qualify for the maximum loan size, though. The amount you can qualify for with FHA depends on your down payment, income, debts, and credit.