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Taking Care of Our Own with an FHA Loan


It probably won’t come as a surprise that more than 90% of the loans originated by AAFMAA Mortgage Services LLC (AMS) are VA Loans. But they’re not the right fit for everyone.

For some AAFMAA Members, normally a son or daughter who didn’t serve in the military or a surviving spouse whose husband or wife died outside of military service, we recommend conventional mortgages or loans that are backed by the Federal Housing Administration (FHA).

Related: What Is a Conventional Loan?

Kaye Harlow did not serve in the military and she is not a military spouse, but she does work for AMS as a loan closer in Jacksonville, NC and we were able to assist her with her mortgage.

In late 2021 she decided to sell her home in Virginia, where she began working with us, and buy one in rural North Carolina since her position allows her to work remotely. To figure out the right mortgage option for her needs, she consulted with Rick Maines, our manager in Fayetteville, NC.

Maines reviewed her credit history and income, the interest rates for both loan types, and asked her how long she planned to own the home. When she answered, “Forever,” he strongly recommended she consider an FHA loan because of the advantages she could gain from that type of home loan.

What’s an FHA Loan?

FHA loans are an option for buyers whose credit scores are 580 and higher, and who can put 3.5% down. They are generally easier to qualify for than a conventional loan and the buyer may be able to qualify for it even after a bankruptcy or foreclosure.

But like any mortgage it’s important to understand the pros and cons for the situation, points out Maines.

Advantages of FHA Loans:

  • FHA loans are assumable. “In a rising-rate market that can be a real advantage for sellers and buyers,” says Maines.
  • You often get better terms. Says Maines: “Depending on the day, FHA loans may be more cost-effective for the buyer, especially if they’ll be in the home longer than five years.”
  • You can use gifts or grants for your down payment, as long as you can document the source of the income.

Disadvantages of FHA Loans:

  • With an FHA loan, you’ll pay an upfront mortgage insurance premium (UFMIP) charge equal to 1.75% of your loan amount. You’ll also pay an annual mortgage insurance premium (MIP) between 0.45% to 1.05% of the loan amount. This payment (divided by 12) becomes part of your monthly mortgage payment.
  • The home must pass an FHA appraisal to ensure it meets the minimum property standards set by the Department of Housing and Urban Development (HUD).
  • There is a limit to how much you can borrow. The 2022 maximum FHA loan limit for most parts of the U.S. is $420,680 for a single-family home. Buyers in high-cost areas of the country may be able to borrow up to $970,800 for a single-family home.

Going with a Better Rate

At the time Harlow was buying, rates on FHA loans – even when factoring in the mortgage premiums – were favorable. She locked in a 30-year fixed-rate mortgage loan just before rates started to rise.

With a pre-approval letter in hand, she looked at several properties and ultimately made an offer on a three-bedroom ranch-style home on a third of an acre in Beulaville, North Carolina, not far from Camp Lejeune.

The home is in a great neighborhood where residents nod and say hello to one another – exactly the atmosphere where she hopes to live through retirement and have her family move closeby.

The only delay was the FHA appraisal, not because of the home but because there is a shortage of FHA-certified inspectors in the area and it took a few extra days to have the inspection done. “Still, knowing the home meets the criteria set by HUD makes me feel more secure in my decision,” Harlow says. “I’m a very detail-oriented person and I wanted to be sure the home was everything I’d hoped for.”

She closed on the house on March 8 and moved in shortly thereafter. “It’s got everything: A great neighborhood… a two-car garage, and even a privacy fence in the back,” she says. “After living with a chain link fence for so many years, having a privacy fence is really nice.”

Maines was happy with the outcome, too. “There’s just a little bit extra riding on a deal like this, and I’m very pleased at how well everything’s worked out for Kaye in buying her home with the FHA loan,” he says.

We’re Here to Help

Whether you’re just thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-211-6308!