What You Should Know About an FHA Loan in Maryland


Home buying can be a costly process, requiring strong financial standing and the ability to foot a down payment that usually accounts for 20% of your total home price. However, there are options at your disposal that help make buying a house more affordable. One of the best options is an FHA Loan in Maryland.

What is an FHA Loan?

An FHA loan is a home loan that is insured by the Federal Housing Administration that allows qualifying individuals to make as low as a 3.5% down payment. While the FHA loan is insured by the federal government, the finances are still acquired from private lenders who have differentiating requirements and terms. The two most attractive aspects of an FHA loan are the aforementioned low down payment and the leniency of terms for those with low credit scores. An FHA loan is recommended, but not limited to first-time home buyers due to its low credit acceptance and minimal down payment however, FHA loans require the purchase of mortgage insurance, and the amount that can be loaned is capped. Finding out if an FHA loan in Maryland is right for you means properly understanding all of the aspects that make up an FHA loan and weighing them against your own personal situation.

Maryland FHA Loan Limits

Loan limits differ by county and state as well as how many units are in the dwelling. Be sure to make yourself aware of the loan limits in the county you plan to purchase the dwelling in because it can greatly differentiate between different counties. 

How to Qualify for an FHA loan in Maryland

Qualifying for an FHA loan is mainly based on your credit score and debt to income ratio and is not limited to just mortgages but also refinancing and renovations. To receive the 3.5% down payment you must have a credit score of 580 or higher. To receive a 10% down payment allowance, you must have a credit score of 500 to 579. The FHA loan must be used on a dwelling that is listed as your primary residence. Your debt to income ratio or DTI must be no more than 43% of your monthly gross income as well as at least two years of verifiable employment. Your private lender will determine the property value of the home you wish to purchase as well as verify your credit and income. Finally, the residence must meet HUD guidelines when appraised by an FHA-approved appraiser.

How to Find an FHA-Approved Lender

Finding an FHA-Approved Lender is not difficult, as they can range from large bank corporations to local community banks and independent mortgage lenders. The challenge is comparing the different terms between lenders and deciding which will cost you the least in the long run. Weighing the different mortgage terms offered by the different private lenders is extremely important in order to secure the best mortgage terms possible. Before applying for an FHA loan you should know your budget and have all of your related supporting documents on hand and ready to go. Once you have that figured out you can shop around for lenders and get preapproved to be able to compare different rates and lending terms.

How to Apply for an FHA Loan

The first and most important step is finding a private lender and assembling your documents as previously mentioned as well as checking your debt and credit score. Once you have taken these simple but crucial preliminary steps, filling out the application for an FHA loan is relatively simple. You should apply for your home loan and receive mortgage pre-approval before you begin shopping for property. After you receive confirmation that your FHA application has been accepted you may have an FHA licensed inspector inspect the property.

Other Types of FHA Loans

1. 203k Loan

With an FHA 203k loan, you can fund the purchase of a home as well as renovations all under the same mortgage. There are a few key differences between a regular FHA loan and a 203k loan, the main one being the minimum down payment requirement of 3.5% if your credit score is 580 or higher. Things like appliances and repairs are covered in a 203k loan but luxury items like a pool or a sports court are not. Discuss with your lender to see if your mortgage plans would work well with a 203k loan option.

2. Home Equity Conversion Mortgage (HECM)

A Home Equity Conversion Mortgage or HECM is a reverse mortgage offered by the FHA that allows you to withdraw a portion of your home’s equity, typically without having to pay monthly payments. These loans are usually beneficial to seniors as upon the borrower’s death, their heirs will have to repay either the full loan balance or 95% of the home’s appraised value. From there, they will have 30 days after the notice to buy, sell or turn the home over to the lender. To qualify, you must be 62 years of age or older, own the property outright or have paid a large amount off, and occupy the property as your primary residence. 

3. Energy Efficient Mortgage

The FHA does offer an Energy Efficient Mortgage program to allow borrowers to finance energy-efficient improvements with their FHA-insured mortgage. A borrower only needs to qualify for the loan amount used to purchase the home and does not need to qualify for the portion used to make the energy-efficient improvements. 

4. 245(a) Loan

An FHA 245(a) allows families with a low to moderate income, who are expecting their income to rise, to purchase a home and make monthly payments that start small and gradually rise. This type of loan is perfect for someone who is expecting their income to rise as it allows the initial payments to be affordable and then, as time goes on, the borrower gets to choose how the payments increase. This allows equity to grow rapidly and brings the repayment date closer. Usually, if conducted properly, a 245(a) loan will allow borrowers to pay off their mortgages much quicker and avoid paying more interest. 

FHA Loans Alternatives

Conventional Loan

Conventional loans are the main type of mortgage loans that are not involved with any government entity. There are conforming and non-conforming conventional loans. A conforming conventional loan follows guidelines set by Fannie May and Freddie Mac. A non-conforming conventional loan does not follow these guidelines and can vary as to what they offer and its terms.


A USDA loan is a government program that incentivizes people with moderate to low incomes to purchase homes in rural areas. One of the main reasons people are drawn to a USDA loan is that they require no down payment however, it is required to pay a mortgage insurance premium and an upfront fee.

VA Loan

A VA loan is a mortgage loan that is offered to eligible veterans and active service members and is insured by the Department of Veterans Affairs. VA loans can be extremely beneficial but are limited to those who have served in the military. Some of these benefits include a no down payment option, no private mortgage insurance requirement, competitive rates, and more permissible credit requirements.

Your Go-To Brokers for an FHA Loan in Maryland

As we can see, there is an abundance of options when it comes to taking out an FHA loan in Maryland, and deciding which one is best for you requires extensive knowledge about the available mortgage options and how they will apply to you. With Federal Hill Mortgage, we will be by your side every step of the way, clearly explaining all of your options in order to find which mortgage plan will benefit you the most. Call or contact the expert team at Federal Hill Mortgage to speak with a mortgage specialist and begin your home-buying journey today.

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