Realtor Brandon Brittingham
Answers Your Real Estate Questions
- I don’t have much money for a down payment. I’ve heard that this will not be a problem if I qualify for an FHA loan. What is an FHA loan, what are its advantages, and where can I get one?
- An FHA loan is one that is guaranteed by the Federal Housing Administration. Almost all lenders—including local loan companies and banks—offer FHA loans.
Borrowers like these loans because they require small down payments, accept lower credit scores, and offer other advantages. Lenders like them because the U.S. government guarantees to pay off the loan if the borrower defaults. (Borrowers must purchase mortgage insurance and add a monthly premium to their mortgage payment.)
Here’s how an FHA loan can make it easier for you to purchase a home:
- If your credit rating is 600 or better, your loan will require a down payment equal to only 3.5% of your home’s price. Conventional non-FHA loans typically require at least 5% down. (Note: If your credit rating is as low as 580, you may still qualify for an FHA loan; however, your down-payment percentage will be higher.)
- You may make your down payment with money that you have received as a gift—for example, from a relative. Very often, traditional loans require that you use money that you yourself have earned.
- An FHA loan allows the seller to pay your closing costs (home owner’s insurance, taxes, legal and other fees) up to an amount equal to 6% of the home’s price. Other government-backed loans typically restrict the seller’s contribution to a maximum of 3%.
- If the seller doesn’t agree to pay your closing costs, you may be able to pay them monthly by including them in your loan.
Now let’s run the numbers. Let’s imagine that your home will cost $100,000. If your credit rating is 600 or above, you will need to put down only $3,500. Furthermore, the seller will be permitted to contribute up to $6,000 toward your closing costs. That’s probably more than you will need.
Want to learn more? In the video below, Realtor Brandon Brittingham of the Maryland and Delaware Group of Long & Foster talks about FHA loans with Tripper Heckscher, a loan officer at Prosperity Mortgage, LLC. If you have questions after you’ve watched the video, please don’t hesitate to contact Brandon or Tripper.
The Maryland and Delaware Group of Long & Foster
107 Williamsport Circle
Salisbury, MD 21804
Prosperity Mortgage, LLC
107 Williamsport Circle
Salisbury, Md. 21804