Maryland is a small but beautiful state with plenty to offer. If you plan to buy a home in the state, you’ll have a good selection of mortgage options to help you find the best rate.
Best Mortgage Lenders in Maryland
There’s no shortage of mortgage lenders in Maryland, as well as across New England. We’ve put together a list of the best to help kickstart your research.
What is a Mortgage Rate?
Whether you’re in search of a purchase or refinance quote, it’s important to first understand what the rate you’re quoted actually represents. When a lender agrees to let you borrow money for a specific period of time, that lender does so in exchange for a fee. That fee is known as “interest” and is set as a percentage of the purchase price, known as the rate. For a home purchase, that fee is called either a mortgage rate or an interest rate.
What Factors Impact Your Mortgage Rate?
Although the current mortgage rates lenders are charging has an impact on the rates each individual lender quotes, there are other factors to look at. Here are a few things that impact the interest rates your lender will quote you:
- Risk: A lender’s first priority is to reduce its risk. That means taking a close look at each applicant’s situation and evaluating the likelihood of default. Here are some things lenders will use to evaluate you:
- Your credit score: Your past creditors reported your activities to the major credit bureaus that used the information to issue a score. Paying your bills on time can go a long way toward making sure your score is a favorable one.
- Your income and debt: Lenders ask how much you make for a reason. They want to see that your bills make up a small enough percentage of your income that you can easily afford your mortgage payment each month.
- Your down payment amount: You’ll at least be required to come up with 3% of the purchase amount at closing. Your ability to manage this down payment will boost your lender’s confidence in you.
- Type of home: Some home types are riskier than others. If you’re purchasing a home that will serve as your primary residence, you’ll get a better interest rate than if you’re buying a vacation home or investing in a property you intend to rent.
- Amount you’re borrowing: Naturally, the amount of money a lender lets you borrow will come into play. If you stop paying on a $400,000 mortgage, the lender suffers a much more damaging loss than if you’d only borrowed $150,000.
- Inflation: When the cost of goods and services go up, so do mortgage rates.
- Supply and demand: Similar to inflation, supply and demand have an effect on the rates you’ll pay. When the housing market is tight, lenders need to drop rates to win customers. When demand is high, those rates often go up to make the most of the situation.
- Location: The housing market varies from one county to another. Even within Maryland, you may find you’re quoted a better rate merely by choosing to live across county lines. Generally speaking, if the area you’re moving is a popular one, the laws of supply and demand apply.
- Federal funds rate: This is more of a behind-the-scenes thing, but the federal funds rate refers to the rate financial institutions charge each other. This rate is tracked by the Federal Reserve, which uses the information as a marker of how the economy is doing. Many lenders watch this number and base their own interest rates on it.
What is a Mortgage Type?
Your purchase quote can vary dramatically based on the type of mortgage you choose. Here are your 4 major mortgage options:
- Conventional: A conventional mortgage is the most straightforward, keeping business between you and your lender. However, the lender takes a bigger risk with this type, which means you’ll see higher rates.
- FHA: To keep the housing market strong, the Federal Housing Administration insures loans to certain borrowers through lenders. Due to that backing, you can get a lower rate with an FHA loan than a conventional.
- USDA: The government also sees a need to stimulate the housing market in certain areas. The USDA backs loans to borrowers interested in buying in certain non-metropolitan areas.
- VA: Veterans and active-duty military personnel can qualify for loans backed by the Veterans Administration. You’ll benefit from zero down payment requirements and lower interest rates.
What is a Mortgage Term?
You’ll have multiple options when it comes to how many years you want to take to pay your mortgage back, known as its term. You may not stay in your home for the full length of your mortgage, but the term you pick will have an impact on your bank account.
- 30-year fixed: When your debt is stretched over 30 years, the amount due each month will be lower. Some lenders for first time buyers recommend this type of mortgage, especially if you’re still working on building an income. But your interest rate will be higher.
- 15-year fixed: If you can swing it, a 15-year fixed rate is a much better option, as it will earn you a lower interest rate. You’ll also pay down the principal faster. Principal is the amount of your loan versus the part of your monthly payment that goes toward interest, homeowner’s insurance and property taxes.
- 5/1 ARM: If fixed-rate mortgages don’t work with your finances, an adjustable-rate mortgage may be worth exploring. With a 5/1 ARM, the first 5 years provide a low fixed rate, increasing to match the current interest rates at the end of the 5 years.
Current Mortgage Rates in Maryland
Like the stock market and retail prices, interest rates tend to change. Lenders are constantly evaluating the market and adjusting the rates they’re quote as a result. Our goal is to make it as easy as possible to research interest rates in your state. To do that, we update these rates as often as possible.
Calculating Interest in Maryland
You can find the best mortgage companies in cities across Maryland. But no matter where you plan to live, it’s important to understand how the interest you pay will be calculated. You won’t be charged a fixed percentage, divided over the many payments you make. Instead, your interest due will be recalculated with each payment you make, based on the remaining amount due. Below is a sampling of interest costs in some of Maryland’s best areas.
|City||Average Home Value||Loan Term||Current Rate||Downpayment (20%)||Monthly Payment||Total Interest Paid|
|Ocean City||$275,500||30-year fixed||6.556%||$55,100||$1,401.20||$284,032.00|
Lender Credit Score Minimums in Maryland
Before you’ll get preapproval for a mortgage, a lender will check into your credit score. Your type of loan determines the minimum credit score you’ll need. You can go as low as the 500s with some government-backed loans. With conventional loans, you’ll typically need to be in the 600s. But exact score requirements vary by lender. Below is a sampling of the credit score minimums from some of Maryland’s lenders.
A Beautiful State to Call Home
Maryland may be small, but it has plenty to offer homeowners. That includes a variety of borrowing options, whether you’re looking for a mortgage or new vehicle. Spend some time shopping around and you’ll be sure to get the best interest rate possible on your new home purchase.
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