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If you are in the planning stages for an FHA home loan, it’s important to begin budgeting for your home loan-related expenses including appraisal fees, home inspection fees, any required pest control, hazard insurance, and other costs.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

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What Does Your Monthly FHA Mortgage Include?

August 8, 2019 - If you are in the planning stages for an FHA home loan, it’s important to begin budgeting for your home loan-related expenses including appraisal fees, home inspection fees, any required pest control, hazard insurance, and other costs.

But you should also anticipate your monthly mortgage payment in your planning and work out a budget accordingly.

The problem for some borrowers is that they can forget to include more in the mortgage payment column than just the principal and interest on the loan. Your monthly mortgage payment includes more than the simple calculation of the principal loan amount, plus interest over the term of the mortgage.

What does your monthly FHA home loan payment include?

HUD 4000.1 lists the most common expenses that can be included in your amount due each month for the mortgage. These include (but may not be limited to):
  • Real estate taxes
  • Hazard insurance
  • Flood insurance as applicable
  • The FHA Mortgage Insurance Premium
  • Homeowner’s Association fees or Condo Owner’s Association fees
  • Ground rent (where applicable)
  • Any special assessments
  • Payments for any acceptable secondary financing
  • Any required escrow payments
FHA loan rules warn the lender that accurate estimates of things like real estate taxes are required. HUD 4000.1 states, “The Mortgagee must use accurate estimates of monthly tax escrows when calculating the total Mortgage Payment.”

But that’s not the only guideline-depending on what kind of property you purchase, the lender may be required to approach the tax estimates differently. “In New Construction cases and Manufactured Homes converting to real estate, property tax estimates must be based on the land and improvements.”

In cases where “real estate taxes are abated”, HUD 4000.1 says the lender is permitted to use the abated amount under certain conditions. Those inclusions include being able to document the abated amount with the taxing agency, and a requirement that the abatement be effective for the first three years of the home loan at a minimum.

Ask your lender if you are not sure how these rules affect your transaction or if there are other expenses which may be included in your monthly mortgage payment you need to be aware of.

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