Government-Backed Loans Mortgage Education

USDA vs. FHA Loans in Maryland

Purchasing a home is a monumental achievement that can serve you for decades. The benefits of home ownership exceed simply having a place to live; the financial advantages are also abundant. The process of buying a home can be daunting for those who aren’t aware of the variety of loan options available. Most people believe that a 20% down payment is required for all types of home loans but this is far from the case. With USDA and FHA loans in Maryland, getting a loan for a home becomes a much more achievable undertaking, with some loan terms starting at zero down payment. By understanding the differences between USDA and FHA loans, you can decide which is best for you and how you can use these loans to afford a home purchase. 

Similarities & Differences between USDA Loans and FHA Loans in Maryland

USDA loans are administered by the United States Department of Agriculture for properties that fall into within pre-defined rural and suburban areas. Meanwhile, FHA loans are to assist low-income individuals in purchasing a house. These loans are administered by the Federal Housing Administration. Both types of loans are backed by their respective government agencies, but the finances are supplied by private lenders.  These government backings protect the lender from loss and allow for more favorable loan terms. Both FHA and USDA loans have unique attributes that must be understood to make an educated decision on which is best for achieving your goals.  

Maximum Lending Amounts

FHA loans in Maryland have a set maximum amount determined by the Department of Housing and Urban Development. This amount is set by the area that the house is located. For lower-end areas, the maximum is set at $314,827, while in high-end areas the maximum is $726,525. USDA Loans do not have a set maximum loan amount, instead, the cap is set based on your ability to qualify for the loan.  

Appraisal Requirements

Appraisals are necessary for both USDA and FHA loans in Maryland. This ensures the lender that the home that is being purchased is being sold at fair market value. An FHA appraisal has to check that the home meets the HUD standards of health as well as the current market value. Both FHA and USDA loans do not require an independent home inspection but it is always a good idea as it will expose potential underlying issues with the home. 

Down Payment

As previously mentioned, the typical requirement for a down payment is a major deterrent for prospective home buyers. FHA loans in Maryland require a downpayment of only 3.5% if your credit score is 580 or higher. If you have a credit score of 500-579, you are required to pay 10% down. USDA loans do not require any down payment at all, making them a very popular choice for first-time buyers. 

Mortgage Insurance

Private mortgage insurance is crucial to keeping FHA and USDA loans functioning and growing. In the case of FHA loans, a mortgage insurance premium is required throughout the duration of the loan unless you provide a downpayment of 10% or more, which would see the additional insurance fee come off in 11 years. The rate of the mortgage insurance premium is based on the term of your mortgage, your loan-to-value ratio, the total mortgage amount, and the size of the down payment. There is also an upfront insurance premium fee that is usually around 1.75% of your loan. 

USDA loans require a funding fee that is either paid when closing or every month in your loan term. This fee includes 1% of your loan amount and 0.35% of the remaining balance on your loan monthly. 

USDA Eligibility Requirements

USDA loans are reserved for rural areas, meaning, that to qualify for a USDA loan, the home that you want to buy must be considered to be located in a rural area. Being eligible for a USDA loan means that you have to meet strict regulations for income and the number of people living in the household. You are considered to be ineligible for a USDA loan if your household income is larger than 115% of the median income in your area. There is no minimum credit score needed to qualify for a USDA Loan, however, the majority of lenders will require a minimum credit score of at least 640. Lastly, your debt-to-income ratio has to be 50% or less.

FHA Loans in Maryland Requirements

FHA loans in Maryland are reserved for low to moderate-income Americans, and for first-time homebuyers or those who haven’t owned a home within the last three years. There are no income requirements but you must be able to prove that your income is capable of paying your insurance and mortgage payments every month. If you have a relatively high credit score, you can have an unfavorable debt-to-income ratio and still be eligible. A minimum of 3.5% downpayment is required if your credit score is higher than 580. If your credit score is between 500-579, you must pay at least 10% down.  

Take on Your Maryland Mortgage With Professional Mortgage Lenders

If you are looking to get the most out of your USDA or FHA loan in Maryland, you need someone in your corner who will offer you expert guidance throughout your home-buying journey. With Federal Hill Mortgage, our team of brokerage and mortgage experts will ensure that every aspect of your mortgage loan is meant to benefit you. If you are ready to get started in the home purchasing process, call or contact Federal Hill Mortgage today!

Government-Backed Loans Mortgage Advice

The Advantages of a Maryland VA Loan

When making a major financial decision such as mortgaging a home, it is important to take advantage of all of the applicable assistance programs available. For our country’s veterans, there exist several benefits that can be applied to a mortgage that will make buying a home much more affordable and easier to secure. Today, we will be going over who is eligible for a Maryland VA loan, the advantages that come with it, and finally, other loan programs available for veterans in Maryland. 

What is a VA Loan?

A VA loan is a loan program where the loan is offered by a private lender, such as a bank or mortgage company, and is guaranteed by the Department of Veterans Affairs. VA loans were created with the purpose of offering affordable home buying options for veterans to mortgage a home after a specific term of service. The VA guarantees a portion of the loan which will allow the lender to offer more favorable mortgage terms. Before getting into the many advantages of a VA loan, one must determine if they fit the criteria for eligibility. 

Who is Eligible for a VA Loan?

Eligibility for a VA loan is not simply attained just from being an active service member as certain credentials have to be met. It can depend on how long you served and when, for example, if service members served for 90 consecutive days during or were active during wartime, served for 181 consecutive days during peacetime, or served for six years in the National Guard or Reserves, then you are eligible. For veterans, minimum service requirements depend on when you served. Refer to the Veterans Affairs website for a detailed list of previous conflicts that the United States was involved in. You can also find the application for a Certificate of Eligibility or a COE on the VA website. Finally, if you are the spouse of a service member who passed away while in the line of duty or due to service-related issues, you also qualify for VA loan eligibility.

Advantages of a VA Loan

There is a long list of benefits and advantages that come with a Maryland VA loan that makes mortgaging a home much more affordable and streamlined. One of the most attractive benefits of a VA loan is that there is no down payment required. Being one of the most difficult initial steps in a mortgage, not having to pay a down payment opens up the possibility of taking on a mortgage for many veterans. Another advantage, and cost reducer, is the ability to defer having to pay mortgage insurance premiums or PMI. When taking out a Maryland VA loan, average interest rates are significantly lower than normal mortgage loans. Having lower interest rates means that the cost of the loan will be much less over the duration of the loan term. Veterans will also enjoy lower closing costs as well as no prepayment penalty. Combine all of these advantages and it is easy to see how a VA loan can easily be an affordable and beneficial financial expenditure.

Other Maryland VA Loan Programs

While the VA loan program offers a multitude of advantageous mortgage benefits, there are other programs in place for veterans that can be utilized to get the most out of your mortgage. While these programs aren’t specifically reserved for veterans, they may still qualify for these programs.

The Maryland Mortgage Program

The Maryland Mortgage Program or MMP, is a 30-year fixed rate home loan for first-time home buyers who are purchasing in Maryland. This program offers competitive rates when compared to other loan terms. To gain full access to the program, applicants must qualify as first-time buyers, however, those not technically considered first-time buyers can still qualify in specific areas in Maryland. This program is intended to assist those who can’t quite afford to purchase their first home as income limits and purchase price caps apply.

Maryland SmartBuy 2.0 Program

The Maryland SmartBuy 2.0 Program assists home buyers that have qualifying student debt in purchasing a home through the Maryland Mortgage Program and deals with homes that are owned by the state of Maryland. It does so by financing up to 15% of the home purchase price for the borrower to pay off their remaining student debt. This helps veterans who have outstanding student debt and are attempting to finance a home. 

Disabled Veteran-Friendly Maryland State Tax Credit For Adaptive Housing 

For veterans with service-related disabilities, the disabled veteran-friendly Maryland State Tax Credit for Adaptive Housing is a program that offers tax breaks for expenses spent on home improvements necessary for adapting the residence to be suitable for the disability. These can include any adaptations to a home that assists in making the disabled person more independent or improving daily functionality. Utilizing this tax credit can add up to immense savings on your annual tax returns.

Property Tax Exemption

Last but certainly not least is the property tax exemption for disabled veterans. This exemption applies to veterans with a service-related disability that is rated 100% by the Veterans Administration. It entails a total exemption from property taxes on the dwelling and surrounding yard. Some un-remarried surviving spouses may also be eligible and spouses of service members who lost their lives in the line of duty indefinitely are eligible.  

Maryland VA Loan to That Help You Succeed

Taking advantage of the many mortgage benefits available for veterans, along with the generous offerings that come with a Maryland VA loan, veterans enjoy a major edge in being able to pay for a mortgage. Using these benefits paves the way for a successful mortgage loan and makes the entire process lighter of a burden on veteran home buyers. When searching for a Maryland VA loan be sure to find a mortgage broker that finds the best deals for you. Federal Hill Mortgage will be by your side every step of the way, ensuring that we secure the best rates for the home of your dreams. Apply now today to get started on your mortgage journey!

Government-Backed Loans Home Buying Advice Mortgage Advice Uncategorized

What Are USDA Loans in Maryland?

With the rising cost of homes in the United States, it is highly important to take advantage of every opportunity to lower the cost of buying a home and make the mortgage process easier and a lighter burden on the buyer. When considering taking on a mortgage loan, a hefty down payment, high-interest rates, and a limited selection are all things that might prevent or deter a potential buyer from beginning the process. For qualifying individuals, some programs exist to make mortgaging a home a much more realistic ambition. Today, we will be discussing USDA loans in Maryland, what they are, who is eligible, and the many advantages that come with this program.

What is a USDA Loan?

A USDA loan is part of a Rural Development program by the U.S Department of Agriculture that is meant to assist lower-income families and individuals in being able to afford a mortgage in rural areas. The loan comes from the USDA Rural Development Guaranteed Housing Loan Program and is one of the least known, yet highly advantageous mortgage programs in the country. Want to know know what areas are eligible? The USDA has a useful tool that allows you to look up area maps or input a property address directly to see its eligibility.

Advantages of a USDA loan

The first and most attractive feature of a Maryland USDA loan is that it requires zero down payment. Without having to come up with a lump sum of cash to initiate the mortgage, those who could not regularly afford to take on a mortgage loan now can. There are also no pre-payment penalties for those who decide to pay off their mortgage earlier. You can finance closing costs into your loan as well as receive a lower fixed interest rate. With USDA loans, private mortgage insurance is not used. Instead, the USDA uses two fees, one being an upfront guarantee fee, equal to 1% of the total financed amount, that is due once the buyer has closed on the loan, and an annual fee, equal to 0.35% of the loans current balance, that is included in your monthly mortgage payment. 

The Three USDA Home Loan Programs

Guaranteed USDA Loans

A guaranteed USDA loan is when the USDA partners with local lenders to offer a loan that the USDA insures a portion of the total mortgage should the buyer default on their loan. To be eligible for this type of USDA loan, adjusted household income may not be higher than 115% of the median family income in the area where the house is located. This encourages lenders to be more willing to offer better loan terms to low-income buyers with lower credit scores. 

Direct USDA Loan

With a direct USDA loan, the funds are borrowed directly from the USDA. This is offered to low-income individuals who otherwise wouldn’t qualify for a typical loan from a bank lender. To receive a direct loan from the USDA, one must fall into the low-income category in the area where the home is located. 

USDA Home Improvement Loans

Also designed to benefit low-income households, the USDA Home Improvement loan option helps to fund repairs or improvements to a dwelling. In some cases, the USDA could potentially combine these with grants that you would not have to pay back. 

Who Qualifies for Eligibility?

To qualify for a Maryland USDA loan, you must first be a U.S citizen that has an income that falls below the set “low income” in the area you intend to purchase the home. The main qualification that is needed to qualify for a USDA loan is that the home is located in an area deemed “rural”. This means that metropolitan areas are exempt from USDA loans however, some suburban areas may qualify. The dwelling that the USDA loan is taken out for must be listed as the primary residence of the person signing the mortgage. With all of that taken into consideration, eligibility for a USDA loan is open to a large majority of Americans that live in rural areas and should be utilized accordingly. 

Accessible USDA Loans in Maryland

The benefits of a Maryland USDA loan are immense and the eligibility fits a wide spectrum of potential homeowners. Taking advantage of this loan can make the difference between being able to afford a mortgage or not. Many people who are renters cannot come up with the initial down payment needed to secure a good rate and therefore are stuck renting. Without this obstacle, many Americans in rural areas can attain a mortgage. When shopping around for Maryland lenders, be sure to find one that maintains your best interest throughout the mortgage process. At Federal Hill Mortgage, we guarantee that we will be by your side every step of the way ensuring that you get the best rates available on the home that you desire. Call us or apply now to begin your journey into your new home.

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