When you’re shopping around for a lender for an FHA home loan, it’s good to remember that buying a home involves costs above and beyond the asking price of the home; some of these costs can be estimated by the lender to give you a rough idea of how much you should budget for when planning your finances for a new FHA mortgage.
The basic costs of buying real estate include the interest rate–how much will your loan cost over its lifetime? It’s easy to dismiss a percentage point up or down until you do the math–one percentage point lower could save you thousands over the life of a 30-year FHA mortgage. That’s one reason why discount points are important–paying more up front can save you money later down the line.
Some aren’t as concerned with how much they spend over the entire term of the loan as long as the monthly payments fit within their budget. Those concerns are equally valid and it’s good to decide up front what your main priority is in this area so you can choose the best loan and terms for you. It’s still important to shop around for the most competitive interest rate you can get even if you’re committed to lower monthly payments rather than savings over the lifetime of the loan–the lower the interest rate, the lower your payments can go.
Settlement services also add to the costs of buying a home. As a condition of getting the FHA mortgage loan a lender may require a survey, title insurance, an application fee, and more. When you’re shopping for a lender, ask for an estimate of the costs of the loan. The FHA allows a 1% lender’s fee in addition to the other costs, don’t forget to factor that in by having a rough idea of how much loan you need and calculate one percent of that figure.
Naturally a lender can’t give you precise figures when you’re asking for an estimate, and any number you get from the lender is subject to change due to a variety of factors. But having that rough idea is a good way to be a more informed FHA loan applicant–you can choose the right financial institution for you knowing your budget has been prepared and while you may encounter an unexpected cost along the way, you’ll be ready for the majority of your expenses.