Last Updated on June 3, 2017 by Andrew Lee
The fact that it’s near the ocean is already a deal closer for many Maryland home buyers. Its close proximity to the Chesapeake Bay famed for its abundant fresh blue crabs, combined with its many different landscapes teeming with fun outdoor activities, such as beaches, farms, and mountain, all contribute to the great life its residents continue to live. And even if it’s right next to the U. S. capital, Washington D. C., it still remains less expensive. (Source: Livability.com)
Home Buying and Lending in the State
Only a handful of people can afford to buy a house straight up. The rest would have to apply and qualify for a mortgage. This is especially true in The Old Line State, where an average home can reach a value of $269,100. This is considerably higher than the nationwide property value of $195,300. (Source: Zillow)
At the moment, mortgage rate average in the state follows the countrywide average. This, combined with its higher prices of real estate, make overall home buying and lending a little more expensive compared with other parts of the United States.
Mortgage Factors to Consider
Prior to pushing through with a mortgage application, consumers should first take the time to determine if they already have the means to actually make the purchase. They should weigh the pros and cons of both staying a renter and becoming a home owner. If they establish that their current and foreseeable finances can already afford the cost of home ownership, they can then begin to explore their housing loan options. They should also ensure they have enough saved up for a down payment.
Deciding on the Most Suitable Type of Mortgage
Mortgages come in two major types: fixed-rate and variable-rate (more commonly called adjustable-rate). The most suitable type of mortgage for a borrower depends on a number of factors, including the length of time a home owner intends to stay in that house, if the borrower prioritizes security over initial lower monthly payments, or if the most important thing is lower monthly payments in the first few years.
Understanding Fixed-Rate Mortgages
One thing that makes fixed-year mortgages dependable is their never-changing interest rates. Once the borrower signs the loan contract, he/she will pay the same amount every month. This is why buyers who intend to live in the same house in the long-run favor this type of housing loan.
Most consumers also opt for the 30-year fixed-rate mortgage, although they can also get a 15-year or a 40-year term. With this, borrowers have three decades to fulfill their promise of repaying their debts. The fact that the payments are spread throughout 30 years also help make it easier to afford.
In this state, average mortgage rate for 30-year fixed-rate mortgages is 4.22%.
Variable-Rate (Adjustable-Rate) Mortgage Basics
A variable-rate or adjustable-rate mortgage (ARM) comes with an interest rate that can “adjust” depending on the movement of the market. In most cases, these have lower upfront interest rates compared to those of the unchanging fixed-rate loans. This lower initial rate only lasts for a specified amount of time, usually ranging from one up to five years. After this, the lender can already increase or decrease the interest rate.
In MD, average ARM interest rate is 2.88%.
Mortgage Help Availability
For those who need help with home buying in the state, there are several places to seek assistance from.
There’s the Department of Housing and Community Development Maryland Mortgage Program, which offers qualifying applicants with down payment assistance as well as partner matching. It makes financing available through forgivable loans or zero-interest deferred loans. The state’s residents can also receive cash grants they can use to help reach the necessary down payment amount, or cover closing costs.
Maryland Mortgage Program: http://mmp.maryland.gov/Pages/Downpayment.aspx
USDA Rural Development – Single family loans: http://www.rd.usda.gov/programs-services/all-programs/single-family-housing-programs
Home Affordable Refinance Program: http://www.harp.gov/