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What Are USDA Loans in Maryland?

With the rising cost of homes in the United States, it is highly important to take advantage of every opportunity to lower the cost of buying a home and make the mortgage process easier and a lighter burden on the buyer. When considering taking on a mortgage loan, a hefty down payment, high-interest rates, and a limited selection are all things that might prevent or deter a potential buyer from beginning the process. For qualifying individuals, some programs exist to make mortgaging a home a much more realistic ambition. Today, we will be discussing USDA loans in Maryland, what they are, who is eligible, and the many advantages that come with this program.

What is a USDA Loan?

A USDA loan is part of a Rural Development program by the U.S Department of Agriculture that is meant to assist lower-income families and individuals in being able to afford a mortgage in rural areas. The loan comes from the USDA Rural Development Guaranteed Housing Loan Program and is one of the least known, yet highly advantageous mortgage programs in the country. Want to know know what areas are eligible? The USDA has a useful tool that allows you to look up area maps or input a property address directly to see its eligibility.

Advantages of a USDA loan

The first and most attractive feature of a Maryland USDA loan is that it requires zero down payment. Without having to come up with a lump sum of cash to initiate the mortgage, those who could not regularly afford to take on a mortgage loan now can. There are also no pre-payment penalties for those who decide to pay off their mortgage earlier. You can finance closing costs into your loan as well as receive a lower fixed interest rate. With USDA loans, private mortgage insurance is not used. Instead, the USDA uses two fees, one being an upfront guarantee fee, equal to 1% of the total financed amount, that is due once the buyer has closed on the loan, and an annual fee, equal to 0.35% of the loans current balance, that is included in your monthly mortgage payment. 

The Three USDA Home Loan Programs

Guaranteed USDA Loans

A guaranteed USDA loan is when the USDA partners with local lenders to offer a loan that the USDA insures a portion of the total mortgage should the buyer default on their loan. To be eligible for this type of USDA loan, adjusted household income may not be higher than 115% of the median family income in the area where the house is located. This encourages lenders to be more willing to offer better loan terms to low-income buyers with lower credit scores. 

Direct USDA Loan

With a direct USDA loan, the funds are borrowed directly from the USDA. This is offered to low-income individuals who otherwise wouldn’t qualify for a typical loan from a bank lender. To receive a direct loan from the USDA, one must fall into the low-income category in the area where the home is located. 

USDA Home Improvement Loans

Also designed to benefit low-income households, the USDA Home Improvement loan option helps to fund repairs or improvements to a dwelling. In some cases, the USDA could potentially combine these with grants that you would not have to pay back. 

Who Qualifies for Eligibility?

To qualify for a Maryland USDA loan, you must first be a U.S citizen that has an income that falls below the set “low income” in the area you intend to purchase the home. The main qualification that is needed to qualify for a USDA loan is that the home is located in an area deemed “rural”. This means that metropolitan areas are exempt from USDA loans however, some suburban areas may qualify. The dwelling that the USDA loan is taken out for must be listed as the primary residence of the person signing the mortgage. With all of that taken into consideration, eligibility for a USDA loan is open to a large majority of Americans that live in rural areas and should be utilized accordingly. 

Accessible USDA Loans in Maryland

The benefits of a Maryland USDA loan are immense and the eligibility fits a wide spectrum of potential homeowners. Taking advantage of this loan can make the difference between being able to afford a mortgage or not. Many people who are renters cannot come up with the initial down payment needed to secure a good rate and therefore are stuck renting. Without this obstacle, many Americans in rural areas can attain a mortgage. When shopping around for Maryland lenders, be sure to find one that maintains your best interest throughout the mortgage process. At Federal Hill Mortgage, we guarantee that we will be by your side every step of the way ensuring that you get the best rates available on the home that you desire. Call us or apply now to begin your journey into your new home.

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What Do Mortgage Brokers in Maryland Do?

Shopping for a mortgage is an involved process. When you’re searching for the perfect home, and right loan to go with it, there are tons of moving parts to manage. It can feel overwhelming. Thankfully, there are resources at your disposal to help make the process go more smoothly. One such option is to work with a mortgage broker. If you’re unfamiliar with what the role of a mortgage broker actually is, and how they can work to your benefit, then you’ve come to the right place. Today we break down what mortgage brokers in Maryland actually do for you.

What is the Role of Mortgage Brokers in Maryland?

Put simply, mortgage brokers are the link between you, the home buyer, and financial institutions that will grant you a mortgage loan for the property you hope to buy. While you can shop for loan rates yourself, the mortgage broker can help facilitate between you and the financial institutions, securing better rates. Your mortgage broker helps manage the process, walking you through each step from your first inquiry to the time you put your signature on a loan contract.

What Are the Advantages of Working with a Mortgage Broker?

Mortgage brokers have certain advantages when originating loans that you may not have access to shopping on your own. Many have relationships with financial institutions, which allows them to negotiate for more favorable rates than you may be able to on your own. Some loans or institutions are only available through mortgage brokers, which means if you shop for yourself, you may be missing out on better loan options. They also help manage the process. There are a lot of steps in the application process, and your mortgage broker is the right expert to help walk you through each phase to ensure you have the best chance of getting a great loan when you come out on the other end. Because of their relationships with financial institutions, mortgage brokers may also be able to help waive certain fees associated with the application process.

What Are Some Things I Should Be Aware of When Choosing Mortgage Brokers in Maryland?

Not all mortgage brokers are created equal. When finding the right mortgage broker in Maryland, it’s important to put your faith in someone that has a proven track record. This will help ensure that they have existing relationships with financial institutions. It’s important to have an in-depth meeting with your prospective mortgage broker beforehand. You want to work with someone you feel is trustworthy, and has your best interests in mind.

The Right Mortgage Broker for You

At Federal Hill Mortgage, we pride ourselves on our exceptional track record and feedback from clients. Our team has one goal, and that’s to get you into the home you want at the best rate possible. If you’re ready to work with an expert mortgage broker team, contact us today.

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4 Steps to Take Before Starting with Maryland Mortgage Lenders

If you’re ready to buy a home, you’re probably already considering what mortgage options are available to you and which mortgage lender is right for you. However, before you start down the path of finding the right Maryland mortgage lenders, there are important steps you should take to prepare your personal finances that will help make the process more efficient and secure the best mortgage rates.

Pay Off or Consildate Debt

A major factor that will affect the mortgage rates you have access to is your debt-to-income ratio. Essentially, how much each month do you have to pay in debt compared to what you earn. There are several types of debt that can affect your overall finances, whether it be a car loan, student loans, credit card debt, medical debt, unpaid taxes, and more. Before reaching out to Maryland mortgage lenders, try to pay off as much of this debt as you can. If you’re having trouble managing debt, debt consolidation may be an option worth exploring to help make payments more streamlined.

Know Your Credit Score and How To Improve It

Your credit score is another key factor that helps loan officers determine what loan amounts and rates you qualify for. Every 12 months, you are entitled to a free credit report from the three major reporting agencies: TransUnion, Equifax, and Experian. These reports will help you get a sense of your overall credit health and identify places where you can begin to improve your score. Our last step, debt elimination, is one such priority that will help improve your score and make it more appealing to lenders. However, there are other steps you can take to help improve your credit as well. One thing to note is that “hard inquiries,” like applying for a mortgage, are rumored to adversely affect your credit score. While this is true, an occasional hard inquiry, such as for your mortgage, shouldn’t have this effect. Rather, you should avoid lots of loan applications over a short period of time.

Save Up for a Down Payment

One of the biggest costs when purchasing a home is the down payment. Unless you have access to a specialized loan, such as an FHA Loan, VA Loan, or USDA Loan, it is likely that you will have to put down 20% of the purchase price on your home. That’s no small feat. It’s crucial to save over time to lessen the burden of your down payment on your finances. The more you save for a down payment, the better chance you have at affording the home you want. Don’t forget to speak with your Maryland mortgage lenders about grants that may be available in your area. For instance, in some municipalities, first-time buyers can get grants to help them afford down payments. If you’d like to learn more about the specialized loans mentioned above, check out our previous blog.

Get Pre-Approved

Pre-approval is a process that will help you make more informed decisions when shopping for loans and finding a home that’s right for you before signing. This process will help you estimate what you can afford based on information like your household income, credit score, outstanding debt, and more. Pre-approval is a great method to give you the knowledge you need when shopping for your home.

Get the Maryland Mortgage Loan That’s Right for You With Federal Hill Mortgage

If you want to check out the #1 ranked mortgage company in Maryland, you’ve come to the right place. Federal Hill Mortgage has years of experience offering great rates to our clients to help them finance the homes of their dreams. Get started on your application today.