Buying a home in Maryland? Here’s What Millennials and Gen Z Should Know

September 14, 2022

So you’ve finally saved up enough money to feel comfortable buying a house. All you needed to do was stop eating avocado toast for every meal and switch your daily iced oat milk latte to a home brew. (Don’t worry…we’re just kidding!) In this blog, we’re going to show you how you can buy a house in Maryland – one of the most economically prosperous states in the country – without giving up your love for avocado, nondairy milk and streaming services.

Why should Millennials or Gen Zers buy a house in Maryland?

We have beaches and mountains, cities and rural towns and plenty of job opportunities for aspiring professionals. Below are just a few of the most compelling reasons to buy a house in Maryland.

There are ample employment opportunities: Millennials and Gen Zers have lived through multiple economic recessions and a global pandemic that turned jobs and college experiences upside down. Fortunately, our state has tons of employment opportunities, particularly in healthcare, government, education, technology and finance. In fact, we’re ranked by US News & World Report among the top five best states for economic opportunity.

It’s home to a vibrant arts community: Are art and film more your vibe? As home to the Maryland Film Festival, MICA and many major art museums, there’s also an exciting art, film and music scene here. House of Cards and Veep shot on location in Baltimore. Even major artists like Beyonce and Drake have taken influence from Baltimore’s club music scene.

It’s an excellent place to raise a family: The US News & World Report also ranks Maryland among the top 15 states in the country for education. Whether you’re already nurturing a family or planning for kids in the future, Maryland is a great place to raise a family. Children here not only get a great education, but also have access to many affordable colleges and prosperous job opportunities.

It’s more affordable than you think: Although Maryland has a reputation as a pricey place to live, there are plenty of affordable places to buy a home. Rural towns like Hagerstown come in well below the national average for home prices. In addition, the average down payment in Baltimore is just below $40,000 – much lower when compared to other cities according to LendingTree.

How to buy a house in Maryland

Improve your credit score as much as possible
Your credit score directly impacts how much you’ll pay for a home loan. Although you can get approved for a home loan with a score in the 600s, you’ll get a better deal with a higher score. At SECU, we typically offer mortgage loans to people with a score of 720 or above. The better your credit score, the lower your interest rate will be. You may even be able to make a lower down payment.

Set your homebuying budget
When setting your budget, take a broad look at your finances and expenses to determine what you can afford. How much are you paying towards student loans? What are you spending on groceries? What other bills do you need to pay in addition to a potential mortgage? Tally that up, and then determine how much you can afford to spend on monthly payments.

Plus, there are a lot more costs associated with buying a house than just the home price alone. Here’s what else you’ll need to account for when determining how much you can spend:          

Upfront spending:

  • Down payment
  • Closing costs
  • Cash reserves: often 2 months worth of mortgage payments

Post-purchase spending:

  • Homeowners insurance
  • Mortgage insurance (if you buy with less than 20% down)
  • Homeowners association fees where applicable
  • Property taxes, up to 1.72% depending where in Maryland you buy
  • Maintenance costs

Save up for a down payment
To qualify for a SECU mortgage loan, you’ll need at least 20% of the purchase price towards your down payment. Not sure how much you should save? We recommend figuring out where you want to buy. Then look at the average home price in that location. Set your budget accordingly, and aim to save 20% (or more).

Keep in mind that home prices vary widely throughout Maryland. Although the median home price for the whole state is $390,000, you can find houses for much less than that. For instance, you can live in White Marsh, a suburb of Baltimore for around $282,100 on average, or enjoy the quiet of Hagerstown for just $155,700 according to UpNest.

What to do if you don’t have 20% down
We know Millennials and Gen Z have far more obstacles in their path to saving money. Whether student loan debt has kept you from building up a savings account or the challenges of the pandemic wiped out what little savings you had built, there are still ways you can get on the path to homeownership.

Opportunities to buy a home with less than 4% down or no down payment:

  • Federal Housing Authority (FHA) loans: enables qualifying applicants to purchase with a down payment of just 3.5%
  • HomeReady: enables applicants with strong credit and low to moderate incomes to purchase with down payments as low as 3%
  • 100% financing: available to those with a strong credit history and a contribution of either $1000 or 1% of the purchase price (whichever is less)

If you choose to buy with a low or zero down payment, there are a few things you should keep in mind:

  • Mortgage insurance: people contributing less than 20% down will need to pay for mortgage insurance–meaning your monthly payments will be higher
  • Higher interest rates: the more money you contribute up front, the lower your interest rate will be
  • Higher lender fees: like interest rates, a lower down payment will lead to higher lender fees, meaning you’ll pay more during closing

Deciding between 20% down and a low or zero down payment
Check out the chart below for a closer look at how your down payment impacts your overall monthly payment.

$250,000 loan0% down payment3.5% down payment20% down payment
Down payment$0$8,750$50,000
Interest rate5.625%4.75%4.25%
Mortgage insurance (monthly)$206$199$0
Taxes and fees$539$532$333
Total monthly payment$1,978$1,790$1,317

When you’re ready to buy your first home, seek support from SECU

In school, we never learned much about how to save money or build a good credit score. With our free financial wellness checkups, you can get support as you prepare to buy your very first home. Plus, we offer mortgage solutions for people ready with a 20% down payment and those without. Check out our mortgage solutions to see how SECU can help you through every step of the homebuying process.

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