For the first time home buyers, FHA mortgage Loans prove to be perfect option because of its easy qualifying standards and lower down payments.  FHA or the Federal Housing Administration helps the people with low credit or not perfect credit purchase house of their dreams.  FHA loan is insured by the FHA only with down payment of 3.5%. However, loan limits offered by the FHA are lower than any other conventional loan program.

On all kinds of mortgage loans offered by FHA, borrowers are required to pay an upfront fee of 1.5% towards MIP or Mortgage Insurance Premium and then a monthly premium of 0.5%. This fee is charged for first five years on a loan for 30 years.  This MIP is charged to protect the lender if the borrower defaults on the loan.

To qualify for a FHA loan, borrower should follow 29/41 debt to loan ratio.  Borrower can use 29% of their income to pay for mortgage payments.  To calculate the loan, first deduct the monthly debts from your income and then add in mortgage payment, insurance, MIP and taxes. This amount should be equal to 41% of borrower’s income.

To calculate the loan and mortgage amount, you can take the help of FHA Loan calculators and FHA mortgage calculators available online at various websites. You need to fill fields like income, rate of interests and others required. You need not pay anything to use these calculators.