Featured Experts
Nela Richardson
Nela Richardson Chief economist, Redfin View bio
Eldad Moraru
Eldad Moraru Realtor, Long & Foster Real Estate View bio
Patrick Cunningham
Patrick Cunningham Senior vice president and partner, HST Mortgage View bio

This guide was written by

MoneyGeek Staff

Whether you are a first-time buyer or a repeat buyer, the process of purchasing a home and financing that purchase can be intimidating. The information and resources on this page can help you take the steps from identifying potential money-saving sources to finding a lender, getting a preapproval for a loan and making sure you understand your loan. You’ll learn about how to get a mortgage for a home purchase or a refinance in Maryland and what to expect as you work your way through the process to your loan closing.

1

Check Mortgage Rates in Maryland

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The mortgage rate you pay is likely to be different than an advertised mortgage rate. Mortgage rates are individually determined and primarily influenced by your credit score and history, the size of your down payment and your property type. For example, condo buyers pay a slightly higher mortgage rate than buyers of single family homes. Rates also vary according to market conditions in Maryland. When a large number of borrowers default on their loans in Maryland, that can drive up rates for new mortgage applicants in the state. Competition among lenders in Maryland can lower mortgage rates.

2

First-Timer? Get Homebuying Help in Maryland

First-time buyers are often eligible for a variety of programs in Maryland through the state government, employers, community organizations and homebuilders. A homebuyer education class is typically required to be eligible for down payment assistance and low interest loans.

“For over 35 years, the Maryland Mortgage Program has been the state’s flagship program to help Marylanders achieve the dream of homeownership,” says Amy Grutzner, director of single family housing at the Maryland Department of Housing and Community Development. “Homeownership is the foundation for strong, healthy communities. But it isn’t always easy for first-time homebuyers. That’s why we offer $5,000 in down payment assistance, affordable interest rates and tax incentives. By making it a requirement for participants to complete homebuyer education, we encourage financial literacy and support sustainable homeownership. The Maryland Mortgage Program has helped tens of thousands of residents become homeowners.”

The Maryland Mortgage Program is available through a statewide network with over 70 participating lenders. Key elements of the program include down payment and closing cost assistance in the form of a zero-interest deferred loan up to $5,000, a 30-year fixed interest rate loan and the Maryland HomeCredit, which allows a homeowner to claim an annual federal tax credit equivalent to 25 percent of their mortgage interest payments up to $2,000 every year for the life of the first mortgage.

The Maryland Department of Housing and Community Development offers regular promotions, such as special homebuyer incentives for certain locations such as Baltimore or initiatives for active military and veterans or homebuyers with significant student loan debt. Individual counties in Maryland also offer homeownership initiatives.

Financial Assistance in Maryland for First-Time Buyers

Maryland has some of the most robust programs in the country to encourage renters to become homeowners.

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3

Understanding Home Affordability in Maryland

Home prices fluctuate in Maryland according to location, type of home, size and condition of the property as well economic factors such as job growth and demand for housing. Determining the highest price you can pay for a home depends on two factors: how much you have available for a down payment and how much a lender will loan you for the balance. You should also evaluate your own comfort level with your monthly housing payment because lenders don’t always include all of your expenses when determining your loan approval.

Housing payments in Maryland include principal and interest as well as property taxes and homeowner’s insurance. Some homes also require homeowner association fees. The amount of your principal and interest payment is determined by your loan amount and mortgage rate. When mortgage rates are low you can afford to borrow more than when they are high.


How Maryland’s Mortgage Rates and Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Baltimore-Towson $1,075 $229,200 (+2.70%) $242,800 $244,100 $251,900
Cumberland $316 $67,400 (-5.90%) $81,100 $92,000 $102,200
Hagerstown-Martinsburg $678 $144,600 (-0.30%) $152,600 $150,700 $147,800
Philadelphia-Camden-Wilmington $956 $203,900 (-0.50%) $223,700 $220,700 $220,300
Washington-Arlington-Alexandria $1,736 $370,400 (+0.70%) $385,200 $383,800 $381,900

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

4

Determine How Much You Can Borrow in Maryland

Mortgage loan programs, including conventional loans and FHA loans, have limits in Maryland that are set each year according to local housing market conditions. These limits establish how much you can borrow, which in turn influences how much you can afford to spend on a home according to the size of your down payment. Loan limits are higher in markets with high housing costs such as the Maryland suburbs of Washington, D.C. The following table can be searched to find out conventional and FHA loan limits in the area where you wish to buy a home.

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5

Homebuying in Maryland: Experts Weigh In

Nela Richardson

Nela Richardson is chief economist with Redfin brokerage in Washington, D.C.

Eldad Moraru

Eldad Moraru is a Realtor with Long & Foster Real Estate in Bethesda, Maryland.

Patrick Cunningham

Patrick Cunningham is a senior vice president and partner with HST Mortgage in Fairfax, Virginia.

What was the housing market like in the state before and during the housing crisis?

Richardson

Prices were riding high in many parts of Maryland before the housing crisis. Baltimore and Prince George’s County were hit particularly hard by the foreclosure crisis, but are recovering.  

Moraru

Prices went up before the housing crisis, although not as much as they did in Washington, D.C. During the crisis there were sharp drops in values in many areas and foreclosures rose dramatically.

Cunningham

Prices shot up prior to the crisis and then dropped dramatically by 10 to 50 percent. Homeowners who had pulled cash out of their homes or had financed close to 100 percent were underwater. Short sales and foreclosures were rampant in 2009 and continued for several years.

What can first-time buyers expect to find today in the state in terms of affordable homes to buy?

Richardson

There are affordable areas for first-time buyers throughout the state. With a price point of $200,000 to $300,000, buyers can find a single-family starter home outside of D.C. in Prince George’s County or an affordable rowhome with urban amenities in Baltimore. Starter homes in the Annapolis area can be found in a similar price range in neighborhoods that offer access to the Chesapeake Bay.

Moraru

Close to D.C., inventory continues to be low and prices continue to climb up slowly. However, as you go further out prices are steady and in some cases are dropping.

Cunningham

“Home values have risen from the lows of 2009 to 2012. Homebuyers may need to sacrifice in terms of the size and age of the home, but should think longer term and buy a place they can remodel in the future.”

What is the housing market like in some of the areas of the state that attract first-time buyers?

Richardson

Baltimore is an attractive option for first-time buyers. Neighborhoods like Canton, Fells Point and Hampden are hotspots for millennial buyers, offering walkability, restaurants and nightlife and relative affordability compared to Washington, D.C.

Moraru

First-time buyers in Maryland often prefer to live close to Washington, D.C. but may have to live farther out in the suburbs to increase affordability.

Cunningham

The housing market near Washington, D.C. is extremely tight for homes in good condition and desirable areas. They are still seeing multiple offers.

6

Don’t Forget Maryland Closing Costs

When you buy a home in Maryland, you’ll need to pay closing costs at the loan settlement. Closing costs in Maryland are nearly in line with the national average at $1,835 on a $200,000 home with a 20 percent down payment. (The national average is $1,847.)

Recordation taxes and transfer taxes vary by county in Maryland. For example, recording taxes in Baltimore City are $10 per thousand dollars of the home’s value, while in Howard County recordation taxes are $5 per thousand dollars. Transfer taxes charged by the state of Maryland are .5 percent of the home value, but some counties add an additional one percent or 1.5 percent to the transfer tax bill when a home changes hands. First-time buyers in the State of Maryland are exempt from paying their portion of the state portion of the transfer tax. You can use a closing agent or an attorney during your closing in Maryland.

Average Closing Costs in the Pine Tree State

Average Origination
Fees
$1,093
Average Third-Party
Fees
$742
Average Total Closing
Costs
$1,835

Source: Bankrate’s 2015 survey of closing costs.

Mortgage Refinancing in Maryland

Low mortgage rates and rising home values make refinancing attractive in Maryland. “Now that some people are regaining equity, we are seeing more homeowners cash out with pay off debt or to remodel,” says Cunningham. “We are doing a lot of no-cost refinancing which you can do with fixed rate loans in high cost areas such as suburban Maryland near Washington, D.C. This is where the lender pays all the fees associated with getting a new mortgage.”

Cunningham says homeowners who have been paying mortgage insurance, which is typically required for buyers who make a down payment of less than 20 percent, are refinancing in order to eliminate their mortgage insurance payment now that home values have risen.

While some homeowners still face challenges with low equity, programs are available to allow them to take advantage of the opportunity to lower their monthly payments. Maryland lenders offer HARP (Home Affordable Refinance Program), a federal program in place to help borrowers with low equity. Another option is to pay cash to pay down your balance to qualify for a refinance.

“The challenges with refinancing are typically based around loan versus value, which is how much equity someone has in the home,” says Cunningham. “There are still some homeowners in areas that are not right around D.C. that haven’t seen as much appreciation. They may be slightly underwater or may just have a little equity. If you have five percent or more equity in your home, it’s worth reviewing for a refinance if your current rate is one-half percent or more above market rates, if you pay mortgage insurance or you have a first and second mortgage that you used to purchase the house.”

Other Maryland Mortgage Resources

Maryland Department of Housing and Community Development

This state housing finance agency also provides development support for affordable housing

Maryland Mortgage Program

provides down payment and closing cost assistance and information about the state’s mortgage tax credit program.

The Anne Arundel County housing office

has information about homeownership classes and incentives.

The Baltimore County housing office

provides links to numerous organizations that support homeownership in the county and provide down payment and closing cost assistance.

The Harford County government

offers homebuyer workshops and, when funding is available, down payment and closing cost assistance.

Prince George’s County

has an annual housing fair to support homeownership and provide education to potential homebuyers.

Montgomery County housing office

has information about loan programs and applying for access to moderately priced dwellings.

The Baltimore Housing office

provides information about a variety of homeownership incentive programs and potential opportunities to buy and rehabilitate a home in the city.

The City of Frederick website

provides information about housing counseling, homeownership incentives and access to moderately priced dwellings.

Homebuyer assistance program of the city of Gaithersburg

includes down payment and closing cost assistance for first-time buyers

City of Hagerstown government site

provides information about homeownership incentives and loans and grants to assist with rehabilitating older homes.