The FHA loan rulebook for single-family home loans has a section instructing the lender, “For all transactions, except non-credit qualifying Streamline Refinances, the underwriter must calculate the Borrowers Total Mortgage Payment to Effective Income Ratio (PTI) and the Total Fixed Payment to Effective Income ratio, or DTI…”
This is required to help the lender determine whether the borrower can afford the new loan or not. And borrowers should know how the mortgage payment is calculated for the same reason. It’s easy to assume that your monthly mortgage payment will be the amount of your home loan divided but the term of the loan (plus any interest), but as you’ll see, it’s not quite that simple.
FHA loan rules in HUD 4000.1 spell out a list of things that must be included as part of the monthly mortgage loan payment calculation:
According to the rules, the total Mortgage Payment includes:
–principal and interest;
–real estate taxes;
–flood insurance as applicable;
–mortgage Insurance Premium;
–HOA or condominium association fees or expenses;
–any applicable ground Rent;
–applicable special assessments;
—payments for any acceptable secondary financing; and
–any other escrow payments.
The insurance payments can be an important part of the calculation, especially if the borrower is applying for a home loan in a flood zone or other area that has a known hazard that requires additional insurance.
FHA loan rules add, “The Mortgagee may deduct the amount of the Mortgage Credit Certificate or Section 8 Homeownership Voucher if it is paid directly to the servicer.”
If you aren’t sure if some of the above apply to your home purchase, discuss the situation with your lender to get a better idea of what the bottom line might be when it comes to your actual monthly mortgage loan payment.
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