How to Calculate an FHA Buydown
- 1). Check your loan documents (Truth-in-Lending Statement) for your note rate, which applies to the life of your loan. The payment on a permanent FHA buydown loan allows the borrower to make a payment based on an interest rate no more than 2 percent below the full note rate, according to the FHA Handbook.
- 2). Subtract the designated buydown reduction from the note rate. For example, with a note rate of 7 percent, your buydown rate would be 5 percent, using FHA maximum allowable buydown of 2 percentage points. The borrower's portion of the monthly payment is based on the reduced rate.
- 3). Input the mortgage loan amount, the term (in years or months, depending on the calculator options) and the interest rate. For example, a $100,000 loan with a 30-year (360-month) term at a reduced interest rate of 5 percent would yield a principal and monthly interest payment of $536.82.
- 4). Calculate the mortgage payment at the full note rate by inputting the loan amount, term and note rate. For example, the payment would increase to $665.30.
- 5). Subtract the payment in Step 3 from the payment in Step 4. The difference is the amount of money escrow will contribute toward the loan each month.
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