June is the perfect time to start thinking about buying a home in Maryland. National Homeownership Month is all about making homeownership more attainable and helping first-time buyers feel confident throughout the process.
Buying your first home is a major milestone that goes beyond finances. It’s about creating a place that feels like home, making memories with family and friends, and building the life you want. There are many resources available to help you make the leap from renter to owner.
Before buying a home in Maryland, here are eight things every first-time buyer should know.
1. Your credit score matters (and you can change it)
One of the most important first-time homeowner tips is understanding how your credit score affects your loan options and rates available to you.
- A higher credit score can mean more lenders to choose from and less expensive loans.
- SECU members can access their credit score and recommendations on how to improve it for free through online banking.
- Small steps like paying bills on time and lowering debt balances can help strengthen your score over time.
Explore additional resources about how credit scores work and how to improve yours.
2. Plan for upfront costs
When you’re buying a home in Maryland (or anywhere), you usually pay a down payment plus other costs.
- Down payment: Usually 3-20% of the purchase price.
- Closing costs: Usually 2% to 6% of the purchase price.
- Home appraisal: Usually $300-500. Sometimes this is included in the closing costs.
- Home inspection: Usually $300-500. Sometimes this is included in the closing costs.
It can be tempting to skip the inspection in a market where sales happen fast, but this could be risky. There are potential alternatives, like including in the contract a home inspection for informational purposes.
3. It’s important to make a homeownership budget early
Owning a home comes with more than a mortgage payment. Planning ahead for utilities, maintenance, and unexpected repairs can help you feel more confident in your budget. Here are common costs to plan for as a homeowner.
Expense | Amount |
Mortgage payment | Depends on purchase price, interest rate, and term of loan. Here’s a calculator to estimate yours. |
Property taxes | |
Check average premiums in Maryland. It’s a good idea to get quotes from multiple insurers. | |
Private mortgage insurance (PMI) | Required if your down payment is less than 20%. Usually between 0.58% and 1.85% of total loan. |
Homeowners association (HOA) fees | The average is $210/month; make sure to check actual rates because they vary significantly. |
Home utilities | Check with local service providers to get rates for water, electric, gas, trash, and internet. |
Home maintenance | A general rule is to set aside 1% of home value annually. |
Budget tip: Many people use the 28/36 rule as a guide when buying a home. Try to keep your monthly home costs below 28% of your pre-tax income, and your total monthly debt payments below 36%. This can help you buy a home that fits comfortably within your budget today and down the road.
4. Know what shapes your monthly payment
Every mortgage has four parts that determine how much you’ll pay.
- Principal: The purchase price minus your down payment. Bigger down payments typically mean a lower interest rate and fewer extra costs, like private mortgage insurance.
- Interest: A percentage of the principal. There are fixed-rate loans (interest rate never changes) and adjustable-rate loans (interest rate can go higher or lower).
- Term: How long you have to repay the loan. Longer terms mean more affordable payments, but you’ll pay more interest over the life of the loan.
- Other: Lender’s required costs, like private mortgage insurance and closing costs.
Explore more lending terms and best practices here.
5. You might qualify for affordable homeownership programs
The government offers programs that can reduce down payments, cover closing costs, and help you get a loan if your credit score is lower. Here are a few of the most common programs.
Program | Who it’s best for |
FHA loans | Buyers with a lower credit score or smaller down payment |
Servicemembers, veterans, or surviving spouses | |
USDA loans | Buyers living in a rural area |
First-time Maryland home buyers |
6. Rate locks can help you avoid surprises
Mortgage rates can change daily. A rate lock helps protect your interest rate for a set period while you move through the buying process. Think of it like putting your mortgage rate in park while you focus on the rest of your home-buying journey.
7. Get preapproved early
Most sellers won’t accept an offer if you aren’t preapproved. Preapproval can take time, so it’s a good idea to start that process early so you can act fast when you find the right home.
- When you apply for preapproval, you’ll submit personal and financial documentation.
- The lender will give you a letter saying how much you are preapproved for (or deny preapproval).
- You still have to qualify for the loan itself. The lender will evaluate your finances and the home.
It’s possible to be preapproved for a bigger loan than you can afford, so make decisions based on your budget, not the preapproval amount.
8. You’re never alone in your home-buying journey
National Homeownership Month is a great time to explore your mortgage options and take the first step toward homeownership. Our mortgage professionals are here to answer questions, explain your options, and help you feel confident throughout the process. Connect with our team today.
