In Maryland, Mortgage Rates So Low You Can't Believe It


Carlo Johnson, a 28-year-old mid-level professional at the Department of Defense, is doing something he never thought possible so early in his career: moving out of his low-rent Baltimore apartment and buying a house with his fiancée in the Washington, D.C., metro area.

On Thursday, he was taking a second look at a $215,000 4,000-square-foot Colonial in Ft. Washington, Md., that comes complete with four bedrooms, three baths and a spacious deck in the well-to-do neighborhood.

The American dream of homeownership may be within reach for Johnson and others in the area, as Maryland is offering homebuyers a fire-sale-level 2.875% mortgage rate in June (APR 3.675%) for specific areas in Baltimore City and the counties of Allegany, Caroline, Dorchester, Garrett, Kent and Somerset.

"I would never consider a house like this if it were not for this situation," Johnson told AOL Real Estate. "I don't make a six-figure salary."

He'll bring 3.5% to the closing for the Federal Housing Administration and then pay the super-low mortgage, almost a full percentage point below the country's average interest rate of 3.75%.

Time To Move To (Certain Parts Of) Maryland?

The attractive offer is possible with a boost from the Maryland Mortgage Program, which has allocated $30 million from sales of tax-exempt bonds to make loans at that rate for the next three months.

Buyers getting this special "homeownership month" rate must live in the home with no option to become a landlord later on. In addition, to defray the possibility that people will buy homes they can't afford, the MMP is requiring that all potential buyers undergo homeownership counseling.

Those looking for an attractive mortgage rate but unwilling to settle in the areas targeted by this incentivized plan can still pin down a 3.25% rate this month on a foreclosure or short sale in Maryland.

The MMP program is part of a larger homeownership initiative in Maryland: There's a $5,000 no-interest loan available to MMP borrowers, and it's possible to obtain money from Baltimore programs such as Vacants to Value, Healthy Neighborhoods and Buying Into Baltimore, as well as some employers.

Ariana Loucas, a realtor at RE/MAX Advantage Realty based in Columbia, Md., who helped Johnson, has seen people in a frenzy to upgrade to a new house with a great mortgage rate.

"Even people under water on their current home are willing to bring $20,000 or $30,000 in cash to the closing just to take advantage of this rate," she said.

Loucas has noticed an increase in first-time home buyers, often young couples looking at 3,000-square-foot homes who otherwise would have sought out more modest townhouses.

"They're looking for big monster homes," she said. "It's insane."

This added urgency in home buying comes coupled with the added hullabaloo of an election year, and Loucas says mortgage rates will stay low until the current administration retires.

Why The Rates Are So Low, And Is It For The Better?

This MMP initiative seeks to target areas in the state hard-hit by foreclosures or the ten counties most impacted by the influx of new workers through Maryland's Base Realignment And Closure (BRAC) process, according to Isaac Megabolugbe, a real estate professor at the Johns Hopkins Carey Business School.

"They're trying to drive individuals and create an impetus to bring people to those individual areas," said Roger Staiger, adjunct real estate professor at the Johns Hopkins Carey Business School in Baltimore. "Also, June is not a high traffic month for home sales, and [the MMP initiative] is an opportunity to create demand in a low-demand market."

The program also helps veterans better adjust to the ongoing housing and mortgage market conditions, and it irrigates the urban economy in Baltimore and beyond with the demand for homeownership.

But Staiger believes this fiscal initiative is not as effective as it could be.

"The money would have been better spent injecting equity, if we want to establish a way to deleverage households," he said.

Programs like the $8,000 tax credit for new home buyers in 2009 or a potential property tax abatement over time might be more beneficial to home buyers than these minuscule interest rates, Staiger said.

"We're getting the U.S. populace fixed on zero cost money, and that's not realistic," Staiger said. "I'm not saying don't squeeze the balloon -- I'm saying squeeze the balloon differently."

(Teke Wiggin contributed to this report)

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