FHA Loans Open the Door to Homeownership
FHA loans are a wonderful home financing option with great benefits, like as low as 3.5% down payment requirement. These nonconventional loans are secured by the Federal Housing Administration (FHA), a branch of the Department of Housing and Urban Development (HUD), and they are funded by private lenders. Brian Masterson – Bay Capital Mortgage works with several national lenders to offer competitive interest rates, while providing the local expertise clients in Annapolis, MD, are looking for. If you’re interested in an FHA loan, contact Brian for a free quote or to schedule a consultation.
Benefits and Basics of FHA Loans
FHA loans, like other nonconventional loans, are insured by a division of the federal government, but funded through private lenders. Lenders know that the government will reimburse most of their losses in the case that a borrower defaults on the loan, which allows them to approve a wider spectrum of eligible borrowers. They have great benefits, including:
- As low as 3.5% down payment with a 500-579 credit score and 10% down payment with a 580+
- Loan terms from 15-30 years
- Fixed Interest rates
- The ability to have some closing costs like appraisal, credit report and title expenses, covered by the seller or lender, with a maximum of 3-5% of the loan amount
The FHA has certain approval guidelines, but ultimately the underwriting (approval requirements) are decided by each lender. There are also limits for loans that it will insure, which vary by county. In Anne Arundel County, those limits are:
- $517,500 for a one-family home
- $662,500 for a two-family home
- $800,800 for a three-family home
- $995,200 for a four-family home
There are some additional basics to consider when comparing FHA loans to conventional, privately insured loans. First, you’ll pay private mortgage insurance for the life of your loan, while you typically cease payments after reaching 20% equity with a conventional loan.
You will also pay an upfront, one-time premium at closing of 1.75%. Interest rates for FHA loans are often higher than conventional loans, which can mean more money over time. Because of this, many of our clients choose to refinance their FHA loans after a few years to a mortgage with a more competitive rate. Some choose FHA Streamline refinance, which is a standardized refinance program from the FHA that requires minimal paperwork. Others choose to refinance to a conventional mortgage after they’ve improved their credit scores and financial standing.
FHA 203(k) Loans
If you would like to make repairs to your existing home, the FHA also offers 203(k) mortgages for home repair. You can choose from the Limited 203(k) program, for financing up to $35,000, or the Section 203(k) program, for more costly repairs.
See What Your Options Are
When you’re ready to learn more about FHA loans and see if they align with your goals as a homeowner, contact Brian Masterson – Bay Capital Mortgage today. Brian knows the market in Annapolis well, and his team will work arduously to find the best rates and make the process as streamlined as possible for you.