Maryland & Virginia · NMLS #2656628

FHA Loans. The Path to Homeownership When Credit or Savings Are the Hurdle.

FHA loans exist for buyers the conventional box leaves out: 3.5% down with a 580 plus credit score, flexible debt-to-income limits, and the entire down payment can come from gift funds. Ken never pushes FHA by default. He shows you FHA and conventional side by side with real numbers, because for some buyers FHA is the smart open door and for others it is the more expensive path. You will know which one you are before you commit.

📅 See If FHA Fits Me Get Pre-Approved →

3.5% down with 580+ credit Gift funds allowed Flexible DTI limits 24-hr pre-approval with docs

Ken Powell

Mortgage Loan Officer · Fairway Home Mortgage

NMLS #2656628 · Equal Housing Lender

Who FHA Is Built For

FHA Shines in Four Situations.

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Credit Below 620

Conventional loans start at 620. FHA welcomes 580 plus at 3.5% down, and 500 to 579 with 10% down. If your score took a hit from medical bills, a divorce, or a rough stretch, FHA is often the realistic path to buying now instead of waiting years.

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Higher Debt-to-Income

Student loans, car payments, and childcare add up. FHA allows meaningfully higher DTI ratios than conventional with strong compensating factors, which can be the difference between approved and declined for buyers in high-cost areas like the DC suburbs.

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Down Payment Coming From Family

FHA allows the entire down payment and closing costs to come from gift funds. Combined with Maryland down payment assistance programs, many FHA buyers close with very little of their own cash.

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House Hacking a 2 to 4 Unit

FHA finances duplexes, triplexes, and fourplexes at 3.5% down as long as you live in one unit. The other units' rent helps cover the mortgage. It is one of the lowest-cost entries into real estate investing available, and one Ken talks through with aspiring investors regularly.

The Honest Comparison

FHA vs. Conventional. The Tradeoff Nobody Explains.

FHA's flexibility has a price: mortgage insurance. Every FHA loan carries an upfront mortgage insurance premium of 1.75% of the loan amount (usually rolled in) plus an annual premium paid monthly. Here is the part that matters: on FHA loans with less than 10% down, that monthly mortgage insurance never cancels. It stays for the life of the loan. Conventional PMI, by contrast, cancels automatically once you reach 22% equity. That is why Ken's rule of thumb is simple: if your credit is 620 plus and your DTI fits, conventional usually wins long term. If FHA is what gets you in the door today, take it, build equity, and plan the refinance to conventional later. Ken maps that exit strategy with you on day one, not as an afterthought.

✅ Choose FHA When

Your credit score is 580 to 619
Your DTI is too high for conventional approval
You had a bankruptcy (2 years) or foreclosure (3 years) in your recent past
Your down payment is fully gifted and conventional pricing is poor at your score
You are house hacking a 2 to 4 unit with minimal cash

✅ Choose Conventional When

Your credit is 620 plus, especially 680 plus
You can put 5% or more down
You plan to stay in the home long term (permanent FHA mortgage insurance gets expensive)
You want PMI to cancel automatically at 22% equity
The property is a condo that is not FHA approved

Requirements

What It Takes to Qualify for an FHA Loan in Maryland.

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Credit & History

580 plus for 3.5% down, 500 to 579 with 10% down. Chapter 7 bankruptcy: 2 years since discharge. Foreclosure: 3 years. Collections and past late payments are reviewed with more flexibility than conventional.

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Income & Employment

Two years of stable employment history (job changes within the same field are fine). W-2, self-employed, and 1099 income all work with documentation. Higher DTI allowed with compensating factors like reserves or residual income.

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Property

Primary residence only. 1 to 4 units, single-family, townhomes, FHA-approved condos, modular, and manufactured homes meeting FHA requirements. The home must pass an FHA appraisal covering basic safety and soundness standards. FHA loan limits vary by county, and the DC-area Maryland counties carry some of the highest limits in the country. Ken confirms your county's current limit during pre-approval.

Fairway has a loan program for almost any mortgage scenario. Contact Ken to determine which loan program best fits your needs.

Frequently Asked Questions

FHA Questions, Answered.

What credit score do I need for an FHA loan in Maryland?+

580 or higher qualifies you for the 3.5% down payment option. Scores from 500 to 579 can still qualify with 10% down. Individual files are reviewed as a whole, so a lower score with strong income and reserves can still work. Ken reviews your full picture rather than a single number.

Does FHA mortgage insurance ever go away?+

With less than 10% down, FHA monthly mortgage insurance lasts the life of the loan. With 10% or more down, it drops off after 11 years. Most FHA buyers eliminate it sooner by refinancing to a conventional loan once they reach 20% equity through payments and appreciation. Ken plans that refinance path with you at the start.

Can I use gift money for my FHA down payment?+

Yes. The entire 3.5% down payment and your closing costs can come from gift funds from family, your employer, or an approved source, documented with a gift letter. FHA also pairs with Maryland Mortgage Program down payment assistance for eligible buyers.

Can I buy a duplex or fourplex with FHA?+

Yes, 2 to 4 unit properties qualify at 3.5% down as long as you live in one unit for at least a year. The other units' rental income can even help you qualify. This is the classic house hacking strategy, and as an investor himself, Ken walks first-time investor buyers through the numbers.

How long after bankruptcy or foreclosure can I get an FHA loan?+

Generally 2 years after a Chapter 7 bankruptcy discharge and 3 years after a foreclosure, with re-established credit. Chapter 13 can be sooner with trustee approval and 12 months of on-time plan payments. These waiting periods are shorter than conventional, which is part of why FHA is the recovery path for many buyers.