FHA Requirements In Maryland

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FHA loans are mortgages that are insured by the Federal Housing Administration (FHA). They allow borrowers to finance homes with lower down payments than conventional lenders typically offer, making them particularly popular with first-time home buyers. The basic FHA loan requirements in Maryland, as well as the rest of the nation, are listed below. All of them must be met to gain approval for an FHA loan.

Down Payment

couple applying for an fha loan with help from a bankerTo determine the amount of the down payment required on an FHA loan, the applicant's FICO score is considered. This is a number that indicates the borrower’s creditworthiness. It is provided by FICO, a data analytics company that computes scores based on consumer credit files that have been collected from various credit bureaus. Lenders review the FICO score to determine how likely you are to make your mortgage payments in a timely manner. A higher score means a greater chance of obtaining an attractive interest rate on your mortgage.

FHA loan applicants need a minimum FICO score of 580 to qualify for a 3.5% down payment. For those whose credit score falls below this, the required down payment will be 10%. This is why it is so important to maintain a good credit history.

Cash down payments may be made using gift assistance on an FHA loan, but the gift must be well documented to prove that it is a true gift rather than a loan in disguise.

Mortgage Insurance Premium

Mortgage insurance premiums (MIPs) are required on FHA-insured loans to protect the lender against losses in the case that you default on your mortgage. Most FHA loans require borrowers to pay an MIP for the lifetime of the mortgage. However, those who make a down payment of 10 percent or more will only have to pay MIP for 11 years. This will be outlined in the terms and conditions of the loan.

Home Requirements

The house that is being purchased with an FHA loan must be evaluated by an appraiser who has been approved by the agency. These loans are only available on homes that will be used as the borrower's primary residence. Investment properties and second homes cannot be financed using an FHA loan. In addition, the borrower must plan to occupy the property within 60 days of closing.

A home inspection to ensure that the property meets the FHA minimum property standards is required. These criteria cover three main requirements. The first is safety; the house must provide a safe and healthy environment for its inhabitants. The second requirement is security, which means that the home should offer its inhabitants protection. The third requirement is soundness, which means that the home should not have structural defects.

The home inspector will be checking for interior issues such as asbestos in the home, chipping lead paint, and missing handrails on staircases. They will also check whether the home’s heating and cooling systems are functional and look at ventilation in the basement. In addition, they will verify that bathroom fixtures are functioning well and can deliver hot water.

On the exterior of the home, inspectors will look at property access, the foundation, and the roof. The FHA requires that homes have a roof with at least two years of life remaining and a foundation that has been properly graded and has sufficient drainage.

FHA Down Payment Assistance

couple inquiring about fha loans and assistanceFor home buyers who have trouble coming up with their down payment, there are several assistance programs available in Maryland. Some of these can be found on the FHA’s official website.

FHA Loan Limits

There is a cap on the amount of money that can be borrowed for an FHA loan, and this depends in part on the county where the home is situated. The maximum lending amount for an FHA loan in a high-cost area such as a major metropolitan area is up to $970,800. In lower-cost regions, however, the limit may be as low as $420,680. The limits are set by taking into account the county's property values, and they can be viewed online on the FHA’s Maryland Loan Limits page.

FHA Loan Income Requirements

Although there is no specific minimum amount of income that borrowers must have to obtain an FHA loan, they need to be able to prove that they have a steady history of employment. They must also have pay stubs, federal tax returns, bank statements, and W2s to verify their income. In some cases, the lender may also request other types of verification.

Discuss Your Goals With Woodsboro Bank

If you are looking to purchase a home, make an appointment with the mortgage professionals at Woodsboro Bank to discuss your eligibility for an FHA loan and other financing options.