Maryland First-Time Home Buying Assistance Programs & Grants for 2023

Maryland First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 07/2022)

    Whether you’re looking in one of the Washington, D.C., bedroom communities, the Maryland capital of Annapolis, or close to the shores of the Chesapeake Bay, Maryland house hunting can come with some eye-popping price tags.

    Home prices rose almost 10% by May 2022 from the same period last year, with prices in hot spots like Middletown and Takoma Park rising 28% by that month, according to the real estate firm Redfin. The Maryland median home sale price of $417,200 was close to the U.S. median of $430,620 in May.

    As in most of the country, home sales began to decline in 2022 after the Covid real estate rush. The number of homes for sale in Maryland had dipped by 13% close to midyear.

    Fortunately, a range of homebuyer assistance programs are available for first-time buyers with their hearts set on owning a piece of the Old Line State.

    Who Is Considered a First-Time Homebuyer in Maryland?

    First of all, a first-time homebuyer isn’t just someone who has never owned a home. Anyone who has not owned a home in the past three years is also considered a first-time homebuyer in Maryland and elsewhere.

    The Maryland Mortgage Program allows honorably discharged veterans who haven’t previously used their first-time buyer exemption and buyers in targeted areas of the state to apply for some of its first-time buyer programs even if they are repeat buyers.

    Homebuyer education classes are required for Maryland Mortgage Program first-time buyer programs. This can help buyers understand how much mortgage they can afford.

    Recommended: The SoFi Guide to First-Time Home Buying

    5 Maryland Programs for First-Time Homebuyers

    The Maryland Mortgage Program, sponsored by the Maryland Department of Housing and Community Development, offers two mortgage types and a variety of down payment assistance programs.

    The state is also unusual in that it has a program for disabled homebuyers and those with student debt. Here’s more.

    1. 1st Time Advantage

    These 30-year fixed-rate mortgages, which can be conventional loans or government-guaranteed FHA, USDA, or VA loans, offer competitive interest rates and may be paired with several second mortgage options for down payment assistance.

    Borrowers must be first-time homeowners. For buyers in some targeted areas of the state and for most veterans, the first-time homeowner requirement does not apply.

    Household income limits are based on location and household size . (In targeted areas , household income may be slightly higher.) Household income is based on all sources of income for everyone 18 and older who will be living in the house. Purchase price limits also exist and depend on location.

    Borrowers must have a FICO® credit score of at least 640 for government-insured loans and at least 640 to 680 for conventional loans. All borrowers must complete homebuyer education.

    2. Flex Loans

    This program is similar to the 1st Time Advantage loans but is available to repeat buyers as well as first-timers. It includes down payment assistance in the form of a 0% interest second mortgage or a grant that does not have to be repaid.

    3. HomeAbility

    If you are disabled or you are a guardian and principal caregiver for an immediate family member you live with who is disabled, the HomeAbility program offers a 30-year fixed-rate conventional loan for 80% of the purchase price and a 0% interest second loan of up to 25% of the purchase price for a down payment or closing costs.

    Payments on the second loan are deferred for the life of the first mortgage.​​​

    The income limits are lower than limits for other Maryland Mortgage Program loans. Applicants must document the disability.

    4. Maryland SmartBuy 3.0

    This program allows borrowers with a minimum student debt balance of $1,000 to borrow up to 15% of the home purchase price to use to pay off outstanding student debt. This is a second loan, not a second mortgage.

    The maximum payoff amount is $30,000, and the full student debt of at least one of the borrowers must be paid off at the time of home purchase.

    The zero-interest loan has no payments, and 20% of the loan is forgiven each year over the course of five years. If the borrower sells before that time, the remaining balance must be repaid. Borrowers must meet the same eligibility requirements as other Maryland Mortgage Program loans.

    5. Maryland Down Payment Assistance

    The Maryland Mortgage Program offers a variety of down payment assistance programs for both the 1st Time Advantage and Flex mortgages.

    For the 1st Time Advantage program, down payment assistance includes:

    1st Time Advantage 5000, a $5,000 loan for down payment and closing costs with a 0% interest rate and no payments for the life of the first mortgage. This loan is eligible for Partner Match funds. With Partner Match , if you’ve obtained other down payment assistance, say from an employer or community organization, Maryland will match that assistance, up to $2,500, through a 0% interest loan.

    •  1st Time Advantage 3% Loan, a down payment assistance second mortgage equal to 3% of the first mortgage.

    •  1st Time Advantage 4% Loan, a down payment assistance second mortgage equal to 4% of the first mortgage.

    •  1st Time Advantage 5% Loan, a down payment assistance second mortgage equal to 5% of the loan.

    Borrowers must meet the same eligibility requirements as the 1st Time Advantage mortgage.

    The Flex program down payment assistance includes:

    •  Flex 5000, a $5,000 loan for down payment and closing costs with a 0% interest rate and no payments for the life of the first mortgage. This loan is also eligible for Partner Match funds.

    •  Flex 3% Loan, a down payment assistance second mortgage equal to 3% of the first mortgage.

    •  Flex 3% Grant, a 3% grant to be used for down payment or closing costs. A grant does not get repaid.

    6. Local Homebuyer Assistance Programs

    Certain cities and areas in Maryland also have first-time homebuyer assistance programs. For example, the Maryland Mortgage Program partners with Montgomery County to offer additional down payment assistance to first-time buyers in this area near Washington, D.C. And Baltimore, Maryland’s most populous city, offers several home buying assistance programs.

    Here are other programs by city or county.

    Recommended: Understanding the Different Types of Mortgage Loans

    How to Apply to Maryland Programs for First-Time Homebuyers

    The Maryland Department of Housing and Community Development provides details for all of its Maryland Mortgage Program loans and down payment assistance.

    The agency does not lend directly but does list participating lenders . HomeAbility is only offered by lenders who have achieved gold or silver status.

    Maryland SmartBuy financing is available through these approved lenders .

    A lender will guide and inform you. It’s especially important for first-time buyers, who may be unfamiliar with the mortgage lending process, to compare interest rates, fees, and other costs among lenders to find the most affordable loan.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years.

    You can learn more about FHA loans and FHA lending limits by area.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    Maryland First-Time Homebuyer Stats for 2022

    Here’s a snapshot of a typical Maryland home sales transaction around mid-2022.

    •  Median home sale price: $417,200

    •  3% down payment: $12,516

    •  20% down payment: $83,440

    •  Average credit score(vs. 714 nationwide): 716

    Financing Tips for First-Time Homebuyers

    Along with federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    Maryland has a thorough program for income-qualified first-time homebuyers looking to enter this expensive market. Other first-timers may find luck with government-insured or conventional loans.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

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    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.

    Is there a first-time homebuyer tax credit in Maryland?

    Maryland previously offered mortgage credit certificates but has suspended the program. The website says the state will continue to reissue credit certificates for refinanced mortgages with approved lenders.

    Is there a first-time veteran homebuyer assistance program in Maryland?

    Veterans Affairs loans are part of the Maryland Mortgage Program, and honorably discharged veterans who have not previously used their first-time buyer exemption do not have to be first-time buyers to take advantage of first-time buyer loans.

    Maryland veterans may also may find options in the federal VA loan programs.

    What credit score do I need for first-time homebuyer assistance in Maryland?

    Programs administered by the Maryland Mortgage program require a credit score of 640 or above for government-insured loans and a minimum score of 640 to 680 for conventional loans, depending on the lender. There are other private, state, and federal loan programs that borrowers with lower scores may be able to access.

    What is the average age of first-time homebuyers in Maryland?

    There seems to be little data about first-time homebuyers in Maryland, but the average age nationally is 33.

    Photo credit: iStock/krblokhin

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