Veterans living in Maryland and transitioning to civilian life must make several important decisions. For many veterans, a home purchase is an attractive way to regain independence as they build equity for themselves and their families. VA loans provide a popular way for qualified service members to get a home mortgage, but they are not the only loans available. Federal Housing Administration (FHA) loan programs allow veterans to achieve flexible financing without a VA loan.
Maryland veterans can qualify for a home loan and start their passage toward independence by taking advantage of local and state resources.
This article examines why an FHA loan may be an advantageous path to ownership compared to VA loans and what veterans need to know to qualify.
What is an FHA Loan?
Similar to VA loans, FHA loans are mortgages. However, instead of being insured by the Office of Veterans Affairs, they are insured by the Federal Housing Administration and approved by a lender, such as a trusted bank. These loans help veterans with moderate income and mid-to-low credit scores afford a home without VA assistance.
FHA loans are not limited to service members but are available to them as an alternative to VA financing, which is not always practical or possible. A veteran may choose an FHA loan for several advantages, including:
- Lower Property Requirements: Compared to the stricter property requirements of VA loans, FHA financing has fewer guidelines.
- Lower Credit Score Requirements: VA and conventional loans require higher credit minimums than FHA loans.
- Lower Down Payments: FHA loans can offer borrowers down payments as low as 3.5%, depending on their credit score.
- No VA Entitlement Required: Veterans who use their VA entitlement and are no longer eligible for further VA loans can apply for an FHA loan.
- Fewer Co-Borrower Requirements: Unlike VA loans, FHA loans often permit co-borrowing with someone not an eligible veteran or the veteran’s spouse.
- More Borrowing Options: FHA loans offer borrowers multiple options for fixed-rate and adjustable-rate mortgages to meet their financial goals.
- More Transferable: FHA loans are more transferable than VA loans, also known as assumable. An FHA loan can be transferred to another qualified party if the veteran sells their home.
These advantages can help veterans qualify for FHA loans, even when a VA loan is unavailable. Many veterans have low credit scores due to outstanding debt or have expended their VA entitlement. FHA loans offer an alternative source of funds with fewer eligibility requirements and restrictions.
State-Funded Support for Maryland Veterans
Maryland offers homeowner programs to help service members and veterans apply for FHA or VA loans and make sense of their financial situations. These programs include:
Maryland Mortgage Program (MMP)
This program, offered by the Department of Housing and Community Development, helps homebuyers purchase and own their homes with state-funded assistance. The MMP is an insured loan backed by the FHA, VA, or USDA, depending on the situation.
The program’s goal is to reduce the monthly payment that new homeowners will be responsible for in exchange for a higher interest rate. Specialty loans, including special assistance grants and student debt repayment plans, are available for certain circumstances or locations.
Visit the Maryland Mortgage Program site to learn more.
Tax Credit for Disabled Veterans
Those who qualify for this state tax credit can use it to make their home more usable for a disabled occupant, regardless of whether the veteran is disabled. This credit can cover up to 50% of the home renovation, even if the home is a rental, up to $5,000. The house must be owned or used by a veteran to qualify.
The list of approved renovations includes grab bars, wall reinforcements, handrails, no-step entrances, chairlifts, roll-in tubs, visual smoke alarms, wider doorways, and more. Visit the Maryland Home Loan Programs for Veterans page to learn more.
Local Housing Authorities
County or city authorities in Maryland may offer forgivable loans or grants to veterans needing help to purchase homes. These veterans and their families should visit their local city websites and search for veterans' assistance programs to learn more about the offerings in their jurisdiction.
Partner With an Experienced Lender to Examine Loan Programs for Maryland Veterans
At Woodsboro Bank, our team of financial professionals helps Maryland residents find loan products that are right for their situation. Veterans who fail to qualify for VA loans due to low entitlement, bad credit, or no income may qualify for FHA loans under certain conditions.
Contact our team today to schedule a consultation. Learn how you or a veteran family member can qualify for an FHA loan in Maryland and purchase a house or regain financial independence with state and local assistance.