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Owning a home is part of the American Dream, but with home prices rising, it can be hard for many people to achieve. Fortunately, for residents of Maryland, there are a number of state and federal options that can help.
This guide will detail the various first-time home buyer programs in MD and across the nation.
In this guide:
- What is the Maryland Department of Housing and Community Development?
- Maryland first-time home buyer programs
- Federal first-time home buyer programs
What is the Maryland Department of Housing and Community Development?
The Maryland Department of Housing and Community Development, or MDHCD, is a state-run agency that offers home loans, down payment and closing cost assistance, and tax credit programs for home buyers in Maryland.
MDHCD also offers home buyer education and sells select state-owned homes via its Maryland SmartBuy program.
Maryland Mortgage Program Highlights
The Maryland Mortgage Program is MDHCD’s home loan program. It offers competitive terms and rates, as well as various forms of financial assistance to MD home buyers in need.
- 30-year, fixed-rate loans
- Offers programs for both first-time and repeat home buyers
- Can be used with various down payment and closing cost assistance programs
- Both government and conventional loan options are available
Who Qualifies as a First-time Home Buyer in Maryland?
According to MDHCD, a first-time home buyer is one who has not owned a residential property in at least three calendar years, so the house you’re buying doesn’t necessarily need to be your first home.
In order to qualify for the Maryland Mortgage Program, the buyer must also meet household income requirements. To be eligible for MMP, you also must:
- Fall under the income limits for your county
- Be buying a primary residence
- Have liquid assets under 20% of the home’s purchase price
- Take a homebuyer education course
There are some MDHCD programs that do not require buyers to be first-timers. These and other eligibility requirements are detailed below each unique loan product.
Maryland First-time Home Buyer Programs
The MDHCD offers eight distinct programs for home buyers in Maryland. These vary slightly in terms, interest rates, and eligibility requirements.
Here are the programs currently offered by the agency:
- MMP 1st Time Advantage
- Maryland HomeCredit
- Maryland SmartBuy
- Maryland HomeAbility
- Flex Loans
- Special Assistance Grant
- DHCD Partner Match
- Montgomery Homeownership Program
MMP 1st Time Advantage
The 1st Time Advantage program is designed specifically for Maryland first-time home buyers. It offers the lowest interest rates of all MDHCD offerings and comes in three variations: 1st Time Advantage Direct, 1st Time Advantage 5000, and 1st Time Advantage 3% Loan.
Depending on which program you use, you can get up to $5,000 or 3% of the loan balance to use toward your down payment and closing costs.
To be eligible, you simply need to be a first-time home buyer as defined above. If you are buying in a targeted area or are an honorably discharged military veteran, you may be able to circumvent this requirement.
Maryland HomeCredit is the MDHCD’s mortgage credit certificate program. This offers home buyers a tax credit that lowers their annual income tax liability by up to 25% of their total mortgage interest payments for the year.
To be eligible for the Maryland HomeCredit program, buyers need to meet the overall MMP eligibility requirements noted above.
The Maryland SmartBuy program is designed for first-time home buyers dealing with student loan debt. It offers financing and closing cost assistance and will even contribute up to 15% of the home’s purchase price toward your student loans (up to $40,000).
- You must purchase a home currently owned by the state of Maryland.
- You need at least $1,000 in student loan debt.
- You can only use an approved SmartBuy lender.
>> Read more: Buying a House With Student Loan Debt
Disabled home buyers should look to the Maryland HomeAbility loan program. It requires no mortgage insurance and comes with a second, interest-free mortgage (up to 25% of the purchase price) to help cover down payment and closing costs.
- At least one borrower must be disabled or the guardian of a disabled family member or dependent (must be proven with a Certificate of Disability or documented disability payments).
- Household income must be under these limits.
MDHCD’s Flex Loans are 30-year mortgages that can be combined with several of the agency’s down payment and closing cost assistance programs. These assistance programs can come as an interest-free grant or via a deferred-interest loan.
There are five tiers of Flex loans, including:
- Flex Direct: These offer the lowest interest rates but include no down payment assistance program.
- Flex 5000: These loans come with a $5,000 loan to help cover down payment and closing costs. It requires zero interest and no monthly payments. It’s only due once the home is sold or refinanced.
- Flex 3% Loan: This loan comes with a down payment and closing cost loan up to 3% of the first mortgage balance. As with the Flex 5000, this comes via a deferred loan.
- Flex 3% Grant: The Flex 3% Grant is similar to the above program, but closing cost and down payment assistance comes via an interest-free grant that does not need to be repaid.
- Flex 4% Grant: This loan program offers a grant of up to 4% of the first mortgage balance for down payment and closing costs. The grant does not need to be repaid.
Special Assistance Grant
The MDHCD’s Special Assistance Grants cover a portion of a home buyer’s closing costs and down payment, and they are only available to borrowers who meet certain income requirements. These grants go up to $2,500 and do not need to be repaid.
- Borrowers must use a Freddie Mac Advantage mortgage loan
- Your household income must be 80% of the Area Median Income or lower.
DHCD Partner Match
This is a program wherein certain employers, home builders, developers, and community organizations agree to match the assistance a borrower received from the Maryland DHCD.
The availability of these programs varies, as do eligibility requirements. To see if your employer is a partner organization, check this directory.
Montgomery Homeownership Program
The Montgomery Homeownership Program is specifically for repeat and first-time home buyers located in Montgomery County, Maryland. Under the program, buyers can get up to $25,000 to use toward their down payment or closing costs via a deferred-payment, second-lien loan.
Federal First-time Home Buyer Programs
Though there are a number of first-time home buyer programs in Maryland, those aren’t a buyer’s only options. The federal government also offers a wide variety of loan options that can help make homeownership more affordable.
These federal first-time home buyer programs include:
- FHA Loans: FHA mortgage loans are the easiest type of loan to qualify for, and there are no income requirements to contend with. They’re available nationwide through most mortgage lenders and require as little as 3.5% down.
- VA Loans: Designed for veterans, military members, and their spouses, VA loans are one of the most affordable mortgage loans you can get. They require no mortgage insurance and no down payment.
- NADL Loans: These are VA loans designed for Native American veterans. Like traditional VA loans, they require no down payment or mortgage insurance.
- USDA Loans: USDA loans, or loans guaranteed by the Department of Agriculture, are designed for use in rural areas. They require no down payment.
- Good Neighbor Next Door Loans: This program offers low-cost homes for public servants like teachers, firefighters, police officers, and more. Buyers get 50% off all eligible HUD-owned homes in their state.
- Fannie Mae or Freddie Mac Loans: Also called conventional loans, these are harder to qualify for than other mortgage options, but they require just a 3% down payment.
The Bottom Line: You can buy a home in Maryland
If you’re a Maryland first-time home buyer, then you have options.
From the Maryland Mortgage Program and the variety of home buying programs offered by the MDHCD to the federal government’s varied loan options, there are several ways you can lower the costs of homeownership and make buying a home more affordable.
Author: Aly Yale