Maryland housing market
Maryland's housing market is feeling the same kinds of pressures that other markets across the country are feeling, with mixed feelings about higher mortgage rates, but intense competition between buyers due to limited inventory. In this environment, it's more important than ever to have the best mortgage lender possible.
According to the Maryland Association of Realtors, home sales were down 22.6% in July 2023 at 5,915 units versus the same time in 2022, but both the median and average prices were up, 4.0% and 3.2% respectively. This is likely due to an ongoing shortage of listings and ongoing interest from buyers.
In July 2023, there were just 1.4 months of inventory on the market, more or less on par with the year prior. Homes are selling in the blink of an eye, in just seven days on average for July 2023, down from eight days in 2022.
When demand increases but supply falls, prices go up. Unfortunately, those high prices can make it more challenging to find your perfect home. Despite rising Maryland mortgage rates, incredibly high demand for limited listings has persisted
How do I calculate my mortgage payment?
Your mortgage payment consists of four separate components: principal, interest, taxes, and insurance. These four things go by the acronym PITI. If your chosen home is located in a neighborhood with a homeowners association, you'll also have to pay HOA dues.
In Maryland, the average home price was $486,385 in July 2023. This is above the nationwide median of $416,100 in the second quarter of 2023, but it's still far from being the most expensive in the country.
Let's say you put down 20% on an average-priced home and got a 7.859% interest rate on a 30-year mortgage. You could expect to pay an estimated $2,816 in principal and interest a month -- not counting any property taxes, insurance, or HOA fees.
Our Maryland mortgage calculator can help you to get an idea of your total monthly mortgage costs. Not only can you calculate the amount you'll pay for your loan, but also what you'll owe for taxes and insurance. It can be helpful to understand a bit more about each of these components of your mortgage payment.
Principal
Principal is the balance due on the mortgage loan. A portion of your monthly payment goes towards reducing it each month. The amount of principal you need to repay monthly is calculated to ensure you'll pay your entire balance off at the end of your loan term (which, for most mortgages, is 15 years, 20 years, or 30 years).
Interest
Interest is the cost of borrowing. You must pay the bank money in each monthly payment in interest on funds it lent you to purchase your home. The higher your interest rate, the higher your monthly payment will be -- and the more total interest you'll pay over time. If you have a fixed-rate loan, your interest rate will never change, but if you opt for an adjustable-rate mortgage, your rate and payment could go up or down.
You may find mortgage rates drop after you've secured a home loan. If that's the case, you may be able to shop among the best refinance lenders for a new loan at a lower rate.
Taxes
Real estate or property taxes are assessed by local governments to fund schools and other services. Mortgage lenders want to make sure you pay taxes so your house isn't seized for non-payment. That's important to lenders because your home is the collateral guaranteeing the loan.
As a result, your lender will divide your annual tax payment by 12 to figure out what you need to pay each month. It will then add that onto your mortgage payment and put the collected funds into an escrow account. Your annual property tax bill is sent right to your lender, which pays it from the escrow account.
In Maryland, the median property tax paid each year is $2,774 according to Tax-Rates.org. Since the average tax rate is 0.87% of a Maryland home, if your home purchase was an average one of about $486,385, you'd have to pay about $353 a month towards taxes.
Insurance
Homeowners insurance varies by area, property, provider, and other factors. If you put down a small down payment, you may also have to pay for private mortgage insurance (PMI). Homeowners insurance covers your dwelling and its contents, while PMI protects the mortgage lender from loss in the event of foreclosure.
In Maryland, the average homeowners insurance premium is $1,630 per year. If you pay the average, your lender will divide this amount by 12 and add around $136 onto your monthly mortgage payment. As with taxes, it will keep the collected funds in escrow until it's time to pay your insurance bill.
Things to know before buying a house in Maryland
If you're interested in using a mortgage calculator for Maryland, chances are good you're serious about purchasing a home. But calculating your monthly mortgage payment is only one step. Before you decide to buy, there are a few other steps you should check off your to-do list.
Save up an emergency fund
Homeownership can be expensive, not least because you may incur surprise repair costs. You need an emergency fund to be ready to cope with any unexpected issues that arise. Having a fund with three to six months of living expenses saved also reduces your chance of foreclosure. It ensures you can pay your mortgage lender even if you lose your job or get sick.
Become a well-qualified borrower
Mortgage lenders consider a number of aspects when deciding if you're a high- or low-risk borrower. These include your credit score, the stability of your income, and the amount of income you have relative to your debt. If you have a good credit score, you've been at your job a while, and your debt is low relative to your income, you should be able to secure a competitive home loan.
Improving your credentials so you qualify for a loan at even a slightly reduced APR can make a big difference in the amount you pay overall. Use our free Maryland mortgage calculator to better understand just how much you could save.
Shop around for a home loan
It's important to choose the right mortgage. As our guide to home loans explains, you have many different options. Loan rates and terms can also vary substantially from one mortgage provider to another.
Get rate quotes from at least three lenders and use our simple Maryland mortgage calculator to see what your payment would be with each one. That way you can decide which one is right for you.
Tips for first-time home buyers in Maryland
Becoming a homeowner for the first time is a major life change, and it's one you want to make sure you're ready for. Beyond just using a simple Maryland mortgage calculator to estimate payments, here are some other things to consider.
Prepare for all the costs of homeownership
You can figure out the costs of principal, interest, taxes, and insurance by using a mortgage calculator for Maryland -- but this isn't the only expense you need to be ready for once you own your own place. For example, you'll want to budget around 1% to 2% of your home's value a year for maintenance. You also need to think about initial costs, such as expenses associated with moving, and ongoing expenses such as snow removal.
Take closing costs into account
In 2021, average closing costs on a new purchase totaled $14,721 in Maryland. Many first-time home buyers are caught off guard by how high those closing expenses can be. Make sure you're ready to pay them before you buy your home in Maryland. You may be able to borrow to cover some of those costs, but be aware that means you'll be paying interest on them for decades.
See if first-time home buyer programs could help you
Maryland offers several first-time home buyer programs, including the Maryland Mortgage Program.
The government has also taken steps to help people buy their first home. For example, the Federal Housing Administration (FHA) guarantees loans in order to reduce the risk to lenders so they can relax their qualifying standards. FHA loans aren't limited to first-time buyers, but many new would-be homeowners take advantage of them because of the easier approval.
It's worth exploring all the different first-time home buyer programs available to you. You may just be able to get the help you need to buy sooner at a more affordable total price.
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Ashley Maready