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100 Painters Mill Road Suite 200
Owings Mills Maryland 21117
Residential Title & Escrow Company Commercial Settlement Services, LLC


The Pros and Cons of an FHA Loan



Are you considering an FHA Loan?

Are you considering an FHA Loan?

FHA loans are a tempting solution for homebuyers who don’t have enough money saved for a significant down payment. Backed by the Federal Housing Administration, these mortgages allow buyers to purchase a home with as little as 3.5% down and do not require many of the restrictions required by other purchasing programs. While the low down payment can be tempting, it is important to weigh both the pros and cons of FHA loans before deciding whether one is right for you.

Advantages of FHA loans

FHA loans have been popular since they were first offered during the Great Depression in the 1930s because they make homeownership more accessible. The low down payment requirement means that even those with little money saved can still purchase a home with a manageable monthly payment. In addition, FHA loans are often available to borrowers with low credit scores which would prevent them from qualifying for other types of loans. Even those with a high debt-to-income ration can qualify for an FHA loan, so they can truly be a godsend for those who are shut out from other traditional mortgages due to bad credit or high amounts of debt.

Disadvantages of FHA loans

While many homeowners are tempted by FHA loans because of the low down payment requirement, these loans tend to be quite expensive in the long run. This is because underlying insurance fees can add a significant amount to the overall cost of your mortgage. Currently, that fee is set at 1.75% at closing as well as a .85% monthly fee for mortgages with terms of more than 15 years when the loan-to-value ratio is more than 95.01%. If the LTV is lower than 95% then the fee is reduced to .8%. Over the life of your loan, this will add a significant cost to your mortgage.


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At Residential Title & Escrow, we bring peace of mind to the settlement table. If you are looking for a title services company to help you through the closing process, please contact us today! You can also fill out our simple online title request form and one of our knowledgeable representatives will get in touch with you promptly. Be sure to follow us on Facebook,Twitter, Pinterest, and Google+ to stay up to date on industry news and events.

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Residential Title & Escrow Company
100 Painters Mill Road Suite 200 Owings Mills, Maryland 21117
Phone: 410-653-3400