How FHA Home Loans Work

How do FHA Home Loans Work?

FHA Home Loans are the most popular loan program available in the Sonoma County Mortgage market. While these loans remain popular unfortunately the media does a very poor job of explaining to consumers how these loans actually work. All FHA loans have mortgage insurance no matter what the down payment is and they will also contain an escrow account to collect for monthly property taxes and hazard insurance. So the way these loans actually work are a little bit unique.

Let’s take a $300,000 house sales price on a house. The minimum down payment needed is 3.5%. Our $10,500 is our down payment and that would be deducted from the $300,000 house price. That gives us a base loan amount of $289,500. Now this is the part that gets a little interesting because now we have to start factoring in mortgage insurance. There is a monthly mortgage insurance premium which is based on 115% of the base loan amount and there is a 1% upfront mortgage insurance premium which is financed into the loan amount. So if we take our $289,500 loan amount for monthly mortgage insurance is $277.44 per month.

Here is the rest of the math calculating an FHA Home Loan.

Now we take 1% of the base loan amount which is $2895 and we added to the base loan amount and amortized over 30 years. This means our financed loan amount is $292,395. If the interest rate we are working with is 4.375% that means our mortgage payment before fire insurance and taxes is $1737.33 and we get that figure by adding together the calculated mortgage payment plus the monthly mortgage insurance. We can estimate fire insurance would be approximately $60 and property taxes would be $312.50 per month (based on 1.25% of the purchase price) so our total monthly payment will be $2109.83 per month.

An FHA Home Loan can make a great Sonoma County Mortgage Loan and they offer very flexible underwriting. What makes these loans so popular is the down payment needed is 3.5%, any credit score 620 or above is permitted and they allow for relatively higher debt to income ratios provided the borrower can provide a reasonable explanation of being able to handle the full mortgage payment. Learn how to get rid of mortgage insurance on your home loan.

FHA Home Loans offer long-term fixed stability and promote homeownership. If you live in Sonoma County and are thinking about purchasing or refinancing a home and don’t have a big down payment or a lot of equity, consider an FHA Home Loan. These loans are insured by the Federal Government. Visit for your next FHA Home Loan today.

Posted in:


Mortgage Word Cloud Art

Why your income is your lifeline to finance a home

Getting mortgage loan financing requires you providing a blend of good cash, ample credit, and…

Why the purchase price in a real estate transaction should not be the single most important factor

Why the purchase price should not be the single most important factor

When buying a home most would believe the number one most important thing you need…

How to avoid getting a jumbo loan due to Coronavirus

Here are 2 mortgage process problems you will want to avoid

Securing mortgage loan financing is the cornerstone of financial prosperity in America. It’s one of…

Self Employed Borrowers

Here is a legit non-traditional income program for self-employed mortgage borrowers

Traditionally, self-employed mortgage borrowers are more heavily scrutinized by mortgage companies because of their gyrating…

View More from The Mortgage Files:


  1. […] following text is directly from HUD which inform us which properties will qualify to For FHA financing.”Examples of minor property conditions that no longer require repair include, but are not […]

  2. […] FHA loans typically have debt income ratio requirements of no larger than 45% of the gross monthly income including all other monthly debts. […]

  3. […] is the FHA mortgage interest rate you would get if the builder does not pay your closing […]

  4. […] FHA loans have an upfront mortgage insurance premium as well as a monthly mortgage insurance premium and the monthly mortgage insurance premium cannot be removed until after 60 months has passed and the borrower has amassed 20% equity in their residence. […]

begin your mortgage journey with sonoma county mortgages

Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!