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First-Time Home Buyer Programs in Maryland

Purchasing your first home can be intimidating. In Maryland, where there’s no county with an average list price under $100,000, it can be expensive, too. As you go through the homebuying and mortgage process, you’ll encounter both big price tags and unfamiliar situations. Luckily, both the federal government and the Maryland state government offer programs to help first-time homebuyers navigate and afford this major purchase.

Since it can be challenging to decide which mortgage is right for you, check out our detailed breakdowns of each program. And if you need more help understanding how homeownership will impact your finances, consider finding a financial advisor.

Federal First-Time Homebuyer Programs

Before we discuss the programs designed specifically for Maryland residents, we’ll go over a handful of national home buyer programs that everyone has access to. Make sure to consider both federal and state options throughout your mortgage search.

FHA Loans

Pros – Low down payment requirements
– Low credit scores accepted
Cons – Higher down payment needed for those with a credit score beneath 580
Eligibility – At least 3.5% down payment
– Credit score of 500 or above
Best For – Those who don’t have perfect credit history or savings for a typical down payment

The Federal Housing Administration of the U.S. federal government backs FHA loans you obtain through an outside lender. Since you can easily qualify for one, these mortgages are a fantastic option for anyone looking to purchase a first home.

Conventional loans require a 20% down payment, but FHA loans only require you provide 3.5% of your new home’s value at the time of purchase. However, to receive the full potential of this perk, you must have a FICO® credit score of 580 or better. If yours is lower, you’ll need to make a 10% down payment, which is still half of a typical mortgage down payment.

VA Loans

Pros – Loan coverage up to 100% of your home’s value
– Low closing costs
– No private mortgage insurance requirements
Cons – Application process can be drawn out- Must pay a VA funding fee
Eligibility – Only for current or former military members, their spouse or another eligible beneficiary
– Credit score of 620 or above
Best For – Veterans with little monthly income or savings for a down payment

Though the Department of Veterans Affairs insures VA loans, third-party mortgage lenders actually provide them. Since many veterans haven’t been able to save enough to afford a down payment, VA loans allow you to buy a home with zero down payment.

In most situations, you need a 620 credit score or better to secure an approval for a VA loan. You’ll also need to pay a VA funding fee, which ranges anywhere from 1.25% to 2.4% of your home’s value depending on whether or not you choose to make a down payment.

Perhaps best of all, VA loans don’t require private mortgage insurance (PMI), typically obligatory on mortgages that don’t have down payments of at least 20%. The government will back that part of your risk. With VA loans, closing costs are generally cheaper than they are with conventional and other mortgages. As a result, you can save even more.

USDA Loans

Pros – No down payment required
– Can be approved even with a low credit score
Cons – Only available to those that don’t qualify for a conventional mortgage
Eligibility – Income lower than 115% of the adjusted U.S. median
– Home must be within an eligible rural area
Best For – Low-to-mid income Americans looking for homes in a rural or suburban area

Legally known as a “Section 502 Single Family Housing Guaranteed Loan Program,” United States Department of Agriculture (USDA) mortgages help attract new homebuyers to rural or semi-rural places throughout the U.S. In most cases, USDA mortgages completely eliminate the need for a down payment.

If your credit falls a bit lower on the FICO® spectrum, you could face a down payment of around 10%, which is still an improvement on most homeowners’ experience. Keep in mind that only those with an income level lower than 115% of the current U.S. median income that have been denied a conventional loan qualify.

Good Neighbor Next Door Program

Pros – Flat 50% discount on your new home’s value
Cons – Not available to most people or in most areas
– Requirement to live in the home for at least three years following purchase
Eligibility – Only for police officers, firefighters, emergency medical technicians or a pre-K to 12th grade teachers
Best For – Emergency personnel or teachers with little in savings

The Good Neighbor Next Door Program is one of the more unique federal mortgage offerings on the market. Only emergency personnel and pre-K through 12th-grade teachers can apply. Although not technically a loan, it allows these individuals to pay only half of the purchase price of a new home. To pay for the home, you could get a conventional, VA or FHA mortgage or pay cash.

T0 be eligible for this program, you must agree to make the home your primary living residence for at least three years. In addition, the house must be located within a “Revitalization Area,” which the Department of Housing and Urban Development (HUD) designates. So long as you meet these terms, you can sell the home and hold onto any equity and profit three years down the line.

Fannie Mae/Freddie Mac

Pros – Very low down payment stipulations
– Flexible credit approval
– Multitude loan styles available
Cons – Could come with higher interest rates
Eligibility – In some cases, no income requirements
Best For – Anyone looking for a low down payment loan option that doesn’t qualify for any other options

Freddie Mac and Fannie Mae are federal government-sponsored mortgage lenders with a number of first-time home buyer programs. While technically two different entities, they offer very similar benefits suitable for anyone buying a first home.

The HomeReady® loan from Fannie Mae requires a down payment as low as 3%. This makes it a great choice for anyone who’s strapped for cash, has a credit score of at least 620 and makes an income at or near the U.S. median. With a HomeReady® loan, you must have private mortgage insurance at the time of purchase, though you can cancel it once you’ve accrued 20% equity in your new home.

Freddie Mac, on the other hand, offers Home Possible® mortgages, with a down payment of just 3%. Home Possible® loans come in 15- to 30-year fixed-rate and 5/5, 5/1, 7/1 and 10/1 adjustable-rate terms. You also will not need any credit history for this loan.

NADL

Pros – Low credit scores welcome
– No down payment requirements
– No private mortgage insurance stipulations
– Low closing costs
Cons – Limited group of eligible lendees
Eligibility – Only for homes located on allotted lands, Alaska Native corporations, Pacific Island territories or federally-recognized trusts
Best For – Native American veterans that lack money for a down payment

Native American veterans and their spouses can apply for a Native American Direct Loan (NADL). This VA-backed mortgage comes with many perks, most notably a 0% down payment requirement and set interest rate. Removing the need for a down payment opens the door for more individuals and families to step into a new home. The interest rate currently sits at 4.5%, though that is subject to change based on the market.

You don’t need a strong credit history to qualify for an NADL. You also won’t have to purchase private mortgage insurance, a benefit that extends from normal VA loans. In an effort to cut down on the extra expenses of buying a home, an NADL even comes with lowered closing costs.

Maryland First-Time Homebuyer Programs

First-Time Home Buyer Programs in Maryland

The Maryland Department of Housing and Community Development created the Maryland Mortgage Program for people who can afford the day-to-day costs of homeownership but can’t scrape together the large funds needed upfront. This program offers 30-year, fixed-rate loans to homebuyers who haven’t owned a residential property in the last three years as well as down payment and closing cost assistance, including non-repayable grants. With each MMP mortgage product, homebuyers apply through one in a statewide network of more than 80 approved lenders. Income requirements range from $92,500 to $154,420 depending on property location and household size. Borrowers should have liquid assets lower than 20% of a home’s purchase price (inclusive of gifts) to qualify.

Maryland Mortgage Premier

Pros – Low rates
– Up to $5,000 help with down payment and closing costs
– No repayments on second loan due until the first mortgage is paid off, refinance, or transferred
Cons – Strict income and asset limits
Eligibility – Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
Best For – Anyone with limited income and savings who can’t afford a typical down payment

The first and flagship program in the Maryland Mortgage Program, Mortgage Premier offers homebuyers a 30-year, fixed-rate mortgage with competitive interest rates. Plus, Mortgage Premier buyers receive a no-interest, deferred loan up to $5,000 to help cover down payment and closing costs. You don’t have to repay this loan until you sell, refinance or make your final mortgage payment. That could be the biggest benefit of all.

MMP 1st Time Advantage

Pros – Low interest rate
– Possible additional loan for 3% of the mortgage
– No repayments on second loan due until the first mortgage is paid off, refinance, or transferred
Cons – Strict income and asset limits
Eligibility – For first-time homebuyers, borrowers purchasing in targeted areas and honorably discharged veterans who have not used the first-time homebuyer exemption yet
– Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
Best For – Buyers that need extra help to afford the upfront costs of home ownership

As with all MMP loan assist programs, MMP 1st Time Advantage gives eligible homebuyers a low interest rate on their mortgage. While the standard 1st Time Advantage offering does not come with down payment and closing cost assistance, borrowers can use assistance funds from other sources.

Plus, there is the 1st Time Advantage with 3% Assistance. With that version, qualified homebuyers receive a deferred, no-interest second loan equal to 3% of the first mortgage. You can use the assistance funds toward the down payment, closing costs and other upfront costs of the purchase. No repayments are due on the second loan until you’ve paid off the primary mortgage or refinanced or transferred it. If the 3% amount exceeds upfront costs, you can apply the remainder to the principal cost of the home.

Maryland Homefront

Pros – Interest rate discount of .25%
Cons – Cannot be combined with rate reductions from other MMP programs
Eligibility – Current or former military member, spouse or other eligible beneficiary
– Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
Best For – Veterans and active-duty military members without the necessary income or savings to afford a mortgage with typical interest rates

Homefront is like the Maryland version of VA loans. To show appreciation for the contributions of Marylanders in the United States armed services and their families, it provides active military members and veterans with a special interest rate discount of 0.25% for an MMP 30-year, fixed-rate mortgage. Eligibility extends to those in the Reserves and National Guard as well as anyone honorably discharged.

The interest rates offer huge savings, but unfortunately, you cannot use the reduction in conjunction with rate reductions through other MMP programs.

You’ve Earned It

Pros – .25% discount on the standard MMP rate
– Up to $5,000 in down payment assistance
– Can be combined with the MMP tax credit program to save even more
Cons – Cannot be combined with rate reductions from other MMP programs
– Only available for a limited time
– Not all homes qualify
Eligibility – Income limits dependent on home location and household size
– Student debt of at least $25,000
– Liquid assets lower than 20% of the home’s purchase price
Best For – Substantial student debt carriers looking for homes in one of Maryland’s sustainable communities

The You’ve Earned It Initiative is a limited program that provides a 0.25% discount on the standard Maryland Mortgage Program mortgage rate. Designed for buyers with at least $25,000 in student debt, it can be an incredible opportunity to own a home for many who thought the option impossible. It’s important to note that the loan must be in the name of the borrower and for the borrower’s education. For certain qualified applicants, Maryland will also provide up to $5,000 in down payment assistance. Plus, You’ve Earned It participants may also be eligible with no fees for the Maryland HomeCredit, which offers tax savings up to $2,000 a year and usually costs $450.

In addition to the student debt requirement, Marylanders must be purchasing a home in one of the state’s so-called Sustainable Communities to qualify. These are regions across the state where governments, businesses, and communities coordinate investments to reach sustainable growth and build thriving neighborhoods. The Maryland Department of Housing and Community Development has made a mapping tool to help you determine whether your potential home is located within a Sustainable Community.

Maryland SmartBuy 

Pros – Receive 15% of the home’s purchase price to pay off student debt
– Low interest rates
– Can be combined other upfront financial support programs
Cons – Not every home qualifies
– All outstanding student debt must be repaid by closing
Eligibility – Income limits dependent on home location and household size
– Student debt of at least $1,000
– Liquid assets lower than 20% of the home’s purchase price
– Homes must be owned or approved by Maryland state
Best For – Those with student debt holding them back from a home purchase

The SmartBuy program offers first-time homebuyers that meet MMP eligibility and have student loans greater than $1,000 the chance to purchase beautifully rehabilitated homes that the state of Maryland owns.

Maryland SmartBuy financing provides up to 15% of your home’s purchase price (up to $40,000) for student debt repayment. If your debt falls in that sweet spot between $1,000 and 15% of your home’s purchase price, this is a great chance to scale two financial challenges at once. Just be aware: the Department of Housing and Community Development expects you to move quickly. You’re required to pay off all student debt before closing.

Maryland Preferred Rate

Pros – Low interest rates
– Can be combined with an MMP tax credit to save even more
Cons – Cannot be combined with down payment or closing cost assistance
Eligibility – Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
Best For – Those with limited savings and average or below-average income looking to score a deal on monthly mortgage payments

Interested in the lowest possible interest rate that Maryland offers? Look no further. The Preferred Rate loan is perfect for homebuyers that need to find an affordable home loan without astronomical monthly payments. It’s specifically designed for those that can afford the day-to-day costs of homeownership, but lack the savings needed for upfront and high-interest loans they would normally face.

When you combine this program with a Maryland HomeCredit tax break, you can save even more. You cannot, however, use Maryland Preferred Rate in conjunction with down payment and closing cost assistance or the Partner Match program. In theory, the long-term savings are so good that it’s worth contributing the upfront costs.

Partner Match

Pros – No-interest loan of up to $2,500
– No repayments due until the first mortgage is paid off, refinanced, or transferred
Cons – Dependent on external organizations
Eligibility – Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
– Must receive assistance from your employer, local government, or other organization
Best For – MMP participants that also receive external homebuying assistance

Some Marylanders are lucky enough to receive financial support from their employer, builder, real estate developer, local government or other community organization. These sources offer mortgage assistance in the form of grants and loans to keep their employees happy, encourage homeownership and attract residents to a particular area. If you receive assistance from these types of programs and choose to finance your home with an MMP loan, the state of Maryland may match the provided funds up to $2,500 to help with upfront homebuying costs.

As with other state-sponsored down payment assistance in Maryland, the additional funding comes as a no-interest, deferred loan. That means you won’t pay anything more than the $2,500 you received, even though you don’t have to repay the funds until you’ve paid the mortgage off fully. The Maryland Department of Housing and Community Development has created a database to help find certified partners who qualify for the MMP match.

4% Grant Assist

Pros – Receive 4% of your mortgage amount
– No repayment required
Cons – Cannot be combined with other MMP grant assistance or Partner Match programs
Eligibility – Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
Best For – Homebuyers taking advantage of MMP programs that need more help to cover their down payment or closing costs

Homebuyers using one of the above MMP mortgage loan programs to finance their first home are also eligible for further assistance through 4% grant assist. As you may guess from the program’s title, it provides eligible homebuyers with 4% of the mortgage loan amount to curb the down payment and closing costs. If you have a $200,000 mortgage, that means $8,000 toward initial homeownership costs.

Grant assist programs help homebuyers save money upfront. But they also help homebuyers have funds to fill and improve their new home and pad their savings accounts for the future. Best of all, you never have to pay the money back. Just keep in mind that you cannot combine the 4% grant assist funds with other down payment assistance grants or Partner Match programs the DHCD offers.

Special Assistance Grant

Pros – Up to $2,500 in assistance
– Can be combined with other MMP loan, grant, and tax credit offerings to save even more
Cons – Must meet eligibility requirements from both the DHCD and Freddie Mac
Eligibility – Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
– Must complete a borrower education class
Best For – Low- and moderate-income borrowers taking advantage of the Freddie Mac Advantage mortgage program that need more help to cover upfront costs

For Marylanders purchasing a home through the federal Freddie Mac Home Possible mortgage program, there is a Special Assistance Grant to help cover their down payment and closing costs. Depending on where your income lines up with other people in the area, you could get between $1,500 (if you earn between 50% and 80% of the average median income) and $2,500 (if you earn less than 50% of the average median income). As with anyone participating in the Freddie Mac program, Marylanders must participate in a borrower education program like Freddie Mac’s CreditSmart®. Unlike the 4% Grant Assist, you must repay the funds eventually.

You can add the Special Assistance Grant to conventional Loan, Grant, and Rate Assist programs, including Homefront, You’ve Earned It, 1st Time Advantage and Partner Match loans. It is not, however, available with SmartBuy, and you cannot use it with refinance products. As an added bonus, the DHCD will waive the typical $450 fee for the HomeCredit tax benefit.

Maryland HomeCredit

Pros – Reduced federal tax bill
– Lasts the entire lifetime of the loan until repayment, refinancing, or sale
Cons – Must pay state and lender fees
Eligibility – Income limits dependent on home location and household size
– Liquid assets lower than 20% of the home’s purchase price
Best For – People that can’t afford both tax bills and mortgage payments on their own

In addition to the loan and rate assistance programs, Maryland provides eligible homebuyers with a HomeCredit certificate to make homeownership even more affordable. Through this program, borrowers receive an annual federal tax reduction equivalent to 25% of your mortgage interest up to $2,000 a year. You can claim the credit every year for the life of the loan. That means it could save you tens of thousands of dollars over time.

Eligibility requirements for HomeCredit are consistent with other MMP programs, but you don’t need an MMP mortgage to qualify for the credit. The application fees, however, will depend on your participation in other Maryland homebuyer programs. MMP borrowers pay a standard fee of $450. Non-MMP borrowers pay $1,100. Since you apply for a credit through an approved lender like you would a home loan, it could be subject to lender fees up to $700 as well. These one-time fees are a small dent in the lifetime savings the credit provides.

Tips to Incorporate Your New Mortgage Into Your Financial Life

First-Time Home Buyer Programs in Maryland

  • Before you start the homebuying process, determine how much house you can afford. That way, your mind and wallet will be in sync as you view potential homes and consider financing options.
  • When it comes to getting a mortgage in Maryland, investigate the lenders, Maryland mortgage interest rates and down payment stipulations of every option. Just because you qualify for a program, doesn’t mean it’s the right loan for you.
  • Buying a home means paying moving and and closing costs in addition to the down payment. Consider all the costs so you don’t go broke before you complete your purchase.
  • When it comes to homeownership, there is more than just monthly mortgage payments. Factor homeowners insurance, property taxes and upkeep in when you think about your future.
  • There’s no way around it: buying a home will impact your financial plan and budget. A professional can show you how to maintain balance across your entire financial life. Get matched with up to three potential advisors with the SmartAsset financial advisor matching tool.

Photo credit: ©iStock.com/phototechno, ©iStock.com/monkeybusinessimages, ©iStock.com/JohnnyGreig

Liz Smith Liz Smith is a graduate of New York University and has been passionate about helping people make better financial decisions since her college days. Liz has been writing for SmartAsset for more than four years. Her areas of expertise include retirement, credit cards and savings. She also focuses on all money issues for millennials. Liz's articles have been featured across the web, including on AOL Finance, Business Insider and WNBC. The biggest personal finance mistake she sees people making: not contributing to retirement early in their careers.
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