Answer Hub · NMLS #2656628

Every Maryland Mortgage Question, Answered.

Plain-English answers to the most common questions Maryland and Virginia home buyers, veterans, seniors, and investors ask. No jargon and no pressure. Just information, the way Ken believes it should be delivered. If your question is not here, he is a phone call away.

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Educator first Retired U.S. Navy veteran Former Realtor® Investor since 2014
Ken Powell Mortgage Loan Officer Maryland NMLS 2656628
Ken Powell
Mortgage Loan Officer · Fairway Home Mortgage
NMLS #2656628 · Equal Housing Lender
The Pre-Approval & Process

Getting Started.

How long does it take to get pre-approved for a mortgage?+
With Ken Powell at Fairway Home Mortgage, you receive your pre-approval letter within 24 hours of submitting your documents. The initial consultation takes about 15 minutes and can be booked online. Ken compares the loan programs you qualify for side by side so you choose with full information, not just the first option offered.
What documents do I need to get pre-approved?+
W-2 employees: last 2 pay stubs, W-2s from the past 2 years, federal tax returns (2 years, all pages), bank statements (2 to 3 months, all accounts), and photo ID. Self-employed and 1099 borrowers: all of the above plus personal and business tax returns, a year-to-date profit and loss statement, and business bank statements. Ken gives you a full checklist during your consultation call. See the Our Process page for the complete list.
What is the difference between pre-qualification and pre-approval?+
Pre-qualification is an informal estimate based on what you tell a lender without verification, and it carries little weight with sellers. Pre-approval involves a full review of your credit, income, and assets with supporting documentation. In a competitive market, a strong pre-approval letter is essential to making competitive offers. Ken issues full pre-approvals, not pre-qualifications, and Fairway's Advantage Pre-Approval goes a step further with an underwritten approval.
How long does it take to close on a home?+
From application to closing is typically 30 to 45 days once you are under contract. Fairway's in-house underwriting keeps files moving, and Ken sends weekly milestone updates so you always know where your loan stands.
What happens during underwriting?+
Underwriting is where an underwriter reviews your full file, including income, credit, assets, and the appraisal, to make a final approval decision. It typically takes one to two weeks. Ken manages the process proactively and responds to any conditions quickly. If the underwriter needs additional documents, he contacts you immediately and explains exactly what is needed.
Credit & Qualifying

Do I Qualify?

What credit score do I need to buy a home in Maryland?+
FHA loans: 580 minimum for 3.5% down (500 to 579 with 10% down). Conventional loans: 620 minimum, with the best rates typically at 740 and above. VA and USDA: typically 620 and up. DSCR investor loans: typically 620 and up. Borrowers below standard thresholds may still qualify with a larger down payment, though approval is not guaranteed. Ken reviews every situation individually.
Can I buy a home if I am self-employed?+
Yes. Self-employed buyers can qualify using two years of tax returns showing consistent income. For business owners who write off significant expenses, bank statement and profit-and-loss programs qualify you on cash flow instead of tax returns. Ken is an investor and business owner himself, so he understands when tax returns fail to tell the full story.
What is DTI and how does it affect my mortgage?+
DTI, or debt-to-income ratio, is the percentage of your gross monthly income that goes toward debt payments, including the new mortgage. Conventional loans typically allow up to roughly 45 to 50% DTI. FHA can go higher with strong compensating factors. Ken calculates your DTI during pre-approval and tells you exactly where you stand.
Does getting pre-approved hurt my credit score?+
A mortgage pre-approval does involve a hard credit pull, which may temporarily reduce your score by a few points. However, multiple mortgage inquiries within a short shopping window are typically treated as a single inquiry by the credit bureaus. The impact is minimal and short-lived. Checking your own credit does not affect your score at all.
Loan Programs

Which Loan Fits?

What is the difference between FHA and conventional loans?+
FHA has lower credit requirements and allows 3.5% down, but requires mortgage insurance for the life of the loan in most cases. Conventional loans require 620 plus credit and 3 to 5% down, but PMI cancels automatically at 20% equity, which can save many buyers a significant amount over the life of the loan. For buyers with 620 plus credit, Ken almost always shows a conventional comparison alongside FHA so you can see the real long-term cost difference.
What is a VA loan and who qualifies?+
VA loans are available to veterans, active-duty service members, National Guard and Reserve members, and eligible surviving spouses. They offer $0 down payment, no PMI, and competitive rates. Veterans with full entitlement have no VA loan limit. As a retired Navy veteran who has used the benefit personally, Ken helps buyers get the most out of it, including using VA loans for 2 to 4 unit properties. Learn more about VA loans.
What is a DSCR loan?+
A DSCR (Debt Service Coverage Ratio) loan qualifies based on a rental property's cash flow rather than the borrower's personal income, W-2s, or tax returns. It is ideal for self-employed investors, LLC buyers, and anyone scaling a rental portfolio. If the property's rent covers the mortgage payment, you typically qualify. Learn more about DSCR loans.
What is a reverse mortgage (HECM)?+
A Home Equity Conversion Mortgage is a federally insured loan for homeowners 62 and better that converts home equity into cash, a line of credit, or monthly advances, with no required monthly mortgage payment. Borrowers must still pay property taxes, insurance, and upkeep. It can also be used to purchase a home through the H4P program. Learn more about reverse mortgages.
Are there down payment assistance programs in Maryland?+
Yes. The Maryland Mortgage Program offers down payment assistance for eligible buyers, Calvert County offers the House Keys 4 Employees program, and Fairway offers National Homebuyers Fund assistance of up to 5% of the purchase price. Ken identifies which programs you qualify for during your pre-approval consultation. See all DPA options.
Building a New Home

Construction & Build-Before-You-Sell.

Can I build a new home before selling my current home?+
Yes. Many Maryland homeowners use a construction-to-permanent loan to build a new primary residence while living in their current home during construction, then move in and sell or rent the previous home. Underwriting typically counts both housing payments in your debt-to-income ratio unless there is an acceptable plan for the departing residence, such as a signed sales contract or documented rental income. Learn more about construction loans.
What is the down payment on a construction loan?+
It depends on the program. VA construction loans require $0 down for eligible veterans. FHA construction-to-permanent follows FHA's guideline minimum of 3.5% down with qualifying credit, though some lenders apply overlays on construction files. Conventional construction loans often require 5 to 20% down, and 20% down typically avoids monthly mortgage insurance. Ken compares all three side by side during your consultation.
What are cash reserves and do construction loans require them?+
Reserves are liquid assets remaining after closing, such as checking, savings, money market funds, and retirement accounts subject to calculation rules, measured in months of your new housing payment. Conventional construction programs usually require reserves, and requirements rise when you own multiple properties or plan to keep your current home as a rental. The exact requirement varies by investor and scenario.
Can I use my current home's equity to help finance a build?+
Yes, and it is very common. Depending on your timeline, equity can be accessed through sale proceeds, a HELOC, a cash-out refinance, or bridge financing to reduce the amount needed on the construction loan. Each route has different costs and qualification implications, so Ken maps out which one fits your plan.
What is a contingency reserve on a construction loan?+
A contingency reserve is a percentage of the construction budget, commonly around 5 to 10% of construction costs, set aside at closing as a safety net for unexpected expenses like unstable soil, material price increases, or weather delays. The lender holds the funds and releases them only for approved cost overruns. If the build finishes under budget, unused funds are typically applied to reduce your mortgage principal rather than refunded. See how the full construction budget works.
I already own land. Can it count toward my down payment?+
Often yes. If you own your lot, the land equity may be applied toward your required investment on a construction-to-permanent loan, subject to lender guidelines. If you have not bought the lot yet, the loan can often include the land purchase and construction costs in one financing package.
Can I keep my current house as a rental when I build?+
Often yes, provided you meet reserve requirements and can document the rental income according to underwriting guidelines. Conventional guidelines may allow documented rental income to offset the departing residence payment, which is an area where conventional financing is generally more flexible than FHA.
Local Knowledge · Charles County

Understanding Your Charles County Taxes.

Property taxes are a real part of your monthly payment, and Ken believes buyers should understand them before they write an offer. Here is how Charles County taxes work, based on the county's Fiscal Year 2026 budget.

🏠 Property Taxes

Property taxes are the county's largest revenue source, derived by multiplying the county tax rate by the property values assessed by the Maryland Department of Assessments and Taxation. Property taxes are broken down between real property and personal property.

  • Real property (land and buildings): the real property tax rate of $1.141 is combined with a Fire and Rescue rate of $0.064 for a total of $1.205 per $100 of assessed value.
  • Add the state rate of $0.112 for the combined rate on your tax bill.
  • Personal property (business, railroad, and utility): $2.8525 plus a Fire and Rescue business rate of $0.16 for a total of $3.0125 per $100 of assessed value.

🧮 How Your Property Taxes Are Calculated

  • All property is physically inspected once every three years. Any increase in full cash value from that inspection is phased in over the following three taxable years in equal annual installments.
  • A tax cap is set by the County Commissioners annually and can range from 0% to 10% of the prior year liability. The current year tax cap is 7%.
  • Any decrease in full cash value is recognized in full in the first year, and the tax bill remains flat until the next reassessment.
  • Property taxes are calculated per $100 of assessed value.

💵 Income, Recordation & Transfer Taxes

  • Income tax is the county's second largest revenue source. The local rate is 3.03% of an individual's Maryland taxable income, legally limited to 3.30%.
  • Recordation tax applies when real property transfers and mortgages are recorded at settlement. An increased rate of $7.00 per $500 of value was proposed for FY2026, up from $5.00 per $500 in FY2025.
  • Transfer tax is imposed on instruments recorded with the Clerk of the Circuit Court for Charles County. The local rate is 0.5%.
  • Admissions and amusements tax on entertainment businesses is 10%, subject to 5% where state sales tax also applies.

🏫 Fair Share School Excise Tax (New Construction)

If you are building or buying new construction in Charles County, budget for the fair share school construction excise tax. For FY2026 the maximum amounts are:

  • $21,972 for a single-family detached home
  • $22,021 for a townhouse (triplex, duplex, and similar)
  • $19,417 for a multifamily housing unit, including mobile homes

The tax is collected annually over 10 years at level amortized payments of principal and interest and may be prepaid at any time. The interest rate matches the rate the county pays on the related school construction bonds.

Source: Charles County Government, Fiscal Year 2026 Budget in Brief. Rates are subject to change by the county. Ken factors accurate taxes into every payment estimate so there are no surprises at the closing table.

Costs, Rates & Insurance

What Will It Cost?

How much down payment do I need?+
VA and USDA loans require $0 down for eligible buyers. FHA requires 3.5% down with 580 plus credit. Conventional 97 requires 3% down for first-time buyers, and standard conventional requires 5% down. With 20% down on a conventional loan you avoid PMI entirely. Down payment assistance programs can reduce or eliminate your out-of-pocket costs.
What are closing costs in Maryland?+
Closing costs in Maryland typically run about 2 to 4% of the purchase price for buyers, and Maryland's recordation and transfer taxes are a meaningful part of that. First-time Maryland home buyers receive an exemption from the state transfer tax on their share. Seller concessions can sometimes offset part of your closing costs. Ken models the full picture during your pre-approval.
What is PMI and when can I remove it?+
PMI (private mortgage insurance) is required on conventional loans when your down payment is less than 20%. On conventional loans, PMI automatically cancels when your loan balance reaches 78% of the original value, and you can request removal at 80%. FHA mortgage insurance is often permanent for loans with less than 10% down, requiring a refinance to a conventional loan to eliminate it.
How are mortgage rates determined?+
Mortgage rates are influenced by the Federal Reserve's benchmark rate, the 10-year Treasury yield, bond markets, your credit score, loan-to-value ratio, loan type, and lender pricing. Rates change daily. Ken advises clients on rate lock strategy, including when to lock versus float based on market conditions and your closing timeline.

Don't See Your Question?

Book a free 15-minute call. Ken will answer anything, with no obligation and no pressure. Answers are a start. A a document-backed pre-approval with side-by-side loan comparisons is the real next step.

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Equal Housing Opportunity Equal Housing Lender Fairway NMLS #2289 Ken Powell NMLS #2656628 Fairway Home Mortgage