The United States is currently experiencing one of the greatest economic declines since the Great Depression. Home values and mortgage rates are some of the lowest in history. Some areas have retained their value more than others, but people all over the nation have become more familiar with the foreclosure process and short sales. Investors that have capital are finding now is one of the best times to find a deal on quality homes with low interest rates.
Housing Costs in Maryland
Maryland home prices, in general, have declined more over the past year than any of the neighboring states in the area. Delaware was the only state that suffered a greater decline in home value than Maryland. In the past year, Maryland experienced an 8.8% decline, and Delaware experienced a 9.6% decline in home value. By contrast, Washington D.C., Pennsylvania, New Jersey and Virginia only experienced a decline in home values between 4.9% and 3.2%.
The United States has shown signs of economic recovery with the introduction of new jobs. This has made the American public hopeful that the economy will return to a more viable state. However, experts predict that the average American will continue to struggle throughout the next decade. Investors should expect to more foreclosures, better home values and low interest rates. This is good news for investors and bad news for the average American who can barely make enough to cover their monthly expenses. Those that do manage to purchase a home may take advantage of low interest rates.
Median Home Prices Nationwide
The median nationwide home value nationwide is $170,500. The annual income of the typical American family owning this type of home is $50,221. Banks categorize this debt-to-income ratio as 3.3. This means that the annual salary multiplied by 3.3 will equal the total value of the home. Before the economic recession, lenders preferred this value to be in the range of 2.2. However, lenders made concessions because of the current economic condition.
Wages have remained stagnant for the past 10 years; therefore, experts did not factor in inflation into these figures. Although, many experts argued that inflation should be included. In fact, experts expected the median home value to be much lower. The predicted value of $119,000 represents a 30% decrease from the current value.
Median Real Estate Prices in Maryland
According to Zillow, the average home prices in Maryland are $80,000 lower than they were in 2006. Currently, the median real estate values in Maryland are $240,900. This is significantly higher than the nationwide values, even with the significant price decrease over the last four years. In Baltimore, a major metropolitan area of Maryland, the average home prices have declined by $40,000 since 2006. Salisbury, another popular area of Maryland, has only experience less than a $20,000 decline.
In Maryland, the typical home buyer with a credit score of 720 or higher may obtain a loan with an interest rate of 4.5%. Most of these fees are based upon a 30 year fixed loan. Under the terms of most loans, the borrower is required a down payment of 20% of the total home purchase price. These loans typically have higher fees of approximately $5,000 or more. Home buyers may pay lower fees if their credit scores are excellent and a higher interest rate is obtained. Fees may be as low as $300 in some instances.
Popular Cities to Live in Maryland
Baltimore is one of the most popular metropolitan areas in Maryland. Baltimore metro area is home to some of the most affluent areas in the country. The city is the largest independent city in the United States with over 8.4 million residents. There are several major points of interest including: The National Aquarium, Johns Hopkins University and Harborplace. Harborplace provides residents and tourists with numerous hours of shopping and entertainment and is situated along the Patapsco River, which is a portion of Chesapeake Bay.
The major employer in the area is John Hopkins Hospital. Other than Johns Hopkins, there are six Fortune 1000 companies located in the area: Legg Mason, Constellation Energy, Grace Chemicals, T. Rowe Price, McCormick & Company and Black & Decker. Deutshce Bank, Sylvan Learning, Under Armour, Fila USA and JoS. A. Bank Clothiers are also located in greater Baltimore. Residents of the area will enjoy The Lyric Opera House, The Walters Art Museum and The Joseph Meyerhoff Symphony Hall.
Not only is Johns Hopkins a major employer, but is recognized as one the leading medical universities in the country. The hospital is scheduled to open a new biotechnology park in the near future. The University of Maryland, Loyola University and College of Notre Dame in Maryland are also reputable educational institutions located in the area.
Many of the affluent African Americans are migrating from historical communities to Randallstown, Owens Mill and Columbia. Affluent white Americans may be found in communities such as: Roland Park, Guilford, Homeland and Cedarcroft. Many of these communities are located near the major universities.
Other popular cities include: Bethesda, Columbia, Annapolis, Rockville and Bowie.
Fastest Growing Cities in Maryland
North Bethesda is currently one of the fastest growing cities in Maryland. The area is home to over 19,000 different households and has experienced a positive growth of 4% since 2008. This number has grown to 14%, since 2009. The average household income in this area has increased by 20% to nearly $121,837 annually. This growth is primarily attributed to the National Institutes of Health, which is a primary employer in North Bethesda. Lockheed Martin, Marriott, Bechtel and Medimmune also contribute to the growth in this area.
Types of Mortgages Offered in Maryland
Maryland lenders primarily issue mortgages rather than security deeds. Mortgages transfer the title to the borrowers name at the close of the home. The borrower maintains the legal title until the loan is paid, sold, forecloses or the home transfers ownership. The lender only has interest in the property as much as the borrower is indebted to the lender. The lender may pursue the borrower legally if this type of loan defaults.
Common mortgage types include: Fixed Rate Mortgages, Adjustable Rate Mortgages (ARMs), Jumbo Mortgages, Rural Mortgages, Two-Step Mortgages, Blanket Mortgages, Buy-Down Mortgages, Deferred Interest Mortgages, Graduated Payment Mortgage, Wraparound Mortgage and numerous other mortgage types.
Recourse Loans
Most Maryland loans are based upon the recourse law. This means that the lender may render legal action for the amount owed on the property if the property forecloses. After the foreclosure sale of the property, lenders have up to three years to pursue the borrower for the loan balance. A deficiency judgment may be delivered to the borrower for the balance of the loan owed.
For instance, a $400,000 mortgage may have been obtained from a lender. At the foreclosure sale, the property may only sell for $300,000. The borrower would then owe $100,000 to the lender. The lender has every legal right to collect the balance. The court will establish payment terms for the amount owed on the loan. Wages may also be garnished in this type of situation, if the borrower cannot pay. In these situations, houses, cars or retirement are not taken from the borrower.
Non-Recourse Loans
Lenders in Maryland do not engage in non-recourse loans. If a foreclosure or default occurs, a legal proceeding that will be required to negotiate the terms of the debt owed. Recourse loans are more time consuming and costly; however, the bank does not lose money if the loan defaults. Non-recourse loans do not require a court proceeding or any notification from the lender to begin the foreclosure process.
The lender will take possession of the home and any collateral associated with the loan. Additionally, the lender may not pursue the debt owed beyond those actions. This protects the borrower from being sued for debt they have no resources to repay. Banks suffer losses from these types of loans and thus, consider them a greater risk. In states that allow these types of loans, lenders charge higher interest rates to compensate for the potential loss. Maryland, however, does not enter into these types of loans, in general.
Foreclosure Process in Maryland
Since the fourth quarter of 2007, Maryland foreclosures have been on the rise. Home values continue to fall all over America, and Maryland is not immune to this process. Judicial foreclosure is used in Maryland. This process requires the lender to seek legal action against the borrower. If the borrower receives a notice of foreclosure, experts recommend contacting the lender and an attorney immediately.
To begin the process, the lender will file a petition. The foreclosure process will begin in 90 days after default occurs, if no notice is provided. If the lender notifies the borrower, the process will begin in 45 days after the lender is notified. If the courts find the fraud or other criminal activity is involved, foreclosure can begin immediately.
Lenders are required, in most instances, to notify the borrower. The lender should make two good faith attempts on two separate days. If the lender cannot contact you, then the lender will contact the courts. The courts will send notification by certified mail, first class mail and post notification on the property.
To stop the foreclosure sale or process, the borrower has up until one day before the sale to pay all past due payment along with any penalties assessed to reinstate the loan. The lender may file for deficiency court action if the balance of the loan is more than the revenue generated from the foreclosure sale.
The court will establish a time period that the owner may have to buy the home back from the investor that purchased the home during the foreclosure sale. This is typically called a period of redemption. Home owners should consult with their attorney to verify that a period of redemption will be included in the terms of the final agreement.
Help with Foreclosure in Maryland
Resources are also available to help Maryland residents save their homes from foreclosure. There are numerous government agencies and non-profits in Maryland that educate residents about their rights concerning foreclosure. Some of the most popular resources include:
- MDHope.org
- FHASecure
- Maryland Department of Labor
- Licensing and Regulation
- Maryland State Bar Association
- HUD Approved Housing Counseling Agencies in Maryland
- Maryland Attorney General Office
The MDHope.org (Home Owners Preserving Equity) program offers up to $15,000 to homeowners that need a short term gap loan to cover their expenses during challenging financial times. Counseling services are also available. FHASecure will offer individuals with non-FHA adjustable rate mortgages (ARMs) the opportunity to refinance.
The Maryland Legal Aid Bureau is available to those who cannot afford to pay expensive legal fees. These agencies will offer services pro bono or for a nominal fee. Maryland Legal Services Corporation (MLSC), Maryland’s Peoples Law Library and Maryland Senior Legal Hotline will also provide legal services for a low cost.