If you have ever considered making the jump from renting to owning, now has never been a better time to buy your first home.
More and more new buyers are entering the housing market in search of their perfect dream home. According to the National Association of Realtors, 33% of all homebuyers are the first-time buyers1.
But while mortgage interest rates remain near all-time lows there are still obstacles that you may experience as a prospective homebuyer that could impede your ability to purchase a new home.
One of the biggest obstacles new buyers face is saving up enough money for their down payment. Traditionally, the typical recommended down payment for buyers is 20% of the purchase price of the home being purchased.
This means that for a home valued at $250,000 you would need to come up with $50,000!
But that’s not all. In addition to your down payment, you will need funds to cover other costs throughout the purchase process including inspection fees, appraisal fees, or even mortgage closing costs.
While it may seem impossible for any new buyer to come up with enough money to cover all the costs associated with buying a home the good news is there are programs available in Maryland to assist new buyers with becoming homeowners.
Here are some of the best down payment assistance programs available for first-time homebuyers looking to purchase a home in the state of Maryland.
MMP First Time Advantage Program
When it comes to down payment assistance, the state of Maryland takes the cake by offering a variety of solutions to buyers aspiring to become new homeowners.
The state has recognized that more and more residents are seeking homeownership for the first time. In response to growing demand, Maryland has rolled out the First Time Advantage Program to help offset the costs of buying a new home in targeted areas.
First Time Advantage 5000
The First Time Advantage 5000 option is one of the more flexible solutions under the First Time Advantage umbrella. This offering provides eligible first-time buyers a 0% interest $5,000 loan that can be used to help cover your down payment or closing costs2.
The $5,000 loan will be set up as a second lien on the property, so check with your lender to make sure there won’t be any issues using the assistance in combination with your first mortgage loan application.
The program requires no payments on the loan for the life of the first mortgage used to purchase the property2. However, if you payoff, refinance, move, or sell the home then the balance of the loan is immediately payable in full2.
First Time Advantage 3% Loan
A similar offering to the First Time Advantage 5000 offering, the First Time Advantage 3% Loan also provides new first-time buyers with a deferred second mortgage2. Funds can also be used towards your down payment or closing costs2.
What’s different is that the First Time Advantage 3% Loan calculates the loan amount for the assistance as a percentage of your first mortgage amount. You can get up to 3% of the balance of your first mortgage loan amount as assistance, meaning the higher the first mortgage balance (and costlier the home) the more assistance you can get2.
Also keep in mind that if the 3% exceeds the total down payment and closing costs, you can use the remaining funds to reduce the principal balance of your first mortgage2.
MMP SmartBuy Program
Student debt has become increasingly burdening as younger generations are now seeking to become homeowners. U.S. citizens between the ages of 23 (and under) and 35 hold the highest balance of student loan debt totaling over $600 billion in 20193.
As a response, Maryland created the SmartBuy program which allows new buyers with student loan debt to purchase eligible state-owned homes while paying off (or down) their student loans. You can get up to 15% of the home’s purchase price to strictly pay off student loans, up to a $40,000 cap2.
Keep in mind, in order to qualify you must have a student loan with a balance of $1,000 or more and the student debt must be paid off in full when you finalize your home purchase2. You are also still subject to all other eligible buyer criteria.
First-Time Homebuyer Eligibility
All first-time homebuyers looking to use MMP’s down payment assistance programs must meet several eligibility requirements to receive assistance.
All applicants must be at least 18 years old and have a valid social security number4. You also cannot have owned a residential property for the last three years, regardless if it was in Maryland or another state4.
As a first-time homebuyer, you may also be required to go through and provide proof of completion of a state-approved new homebuyer education course.
Additionally, you must also meet certain income eligibility criteria based on where the home is located and the total size of your household4. MMP down payment assistance is only available to buyers looking to purchase homes in targeted areas4. The subject property must also be used as your primary dwelling4.
1 2020 Home Buyers and Sellers Generational Trends Report (Rep.). (2020, March). Retrieved September 14, 2020, from National Association of Realtors website: https://www.nar.realtor/sites/default/files/documents/2020-generational-trends-report-03-05-2020.pdf
2 Our Programs. (n.d.). Retrieved September 14, 2020, from https://mmp.maryland.gov/Pages/Programs.aspx
3 Backman, M. (2020, February 05). Student Loan Debt Statistics for 2019. Retrieved September 14, 2020, from https://www.fool.com/student-loans/student-loan-debt-statistics/
4 Eligibility. (n.d.). Retrieved September 14, 2020, from https://mmp.maryland.gov/Pages/Eligibility.aspx
Author: Billy Rabbitt offers buyer and seller services for the Southern Maryland real estate market.