You've saved up for a home for years, but even with low mortgage rates, you worry about affording both the down payment and the monthly costs that come with homeownership.
If you live in Maryland -- where the homeownership rate is 67%, according to the U.S. Census Bureau -- know that owning a home in the state isn't cheap. The median home value of owner-occupied homes was $332,500 in 2019, according to the U.S. Census Bureau's 2019 American Community Survey, compared to the national median of $240,500.
Luckily, Maryland residents not only have federal loan programs, but also ample state and local programs that can make it easier to get a mortgage they can afford as well as help cover their down payment and closing costs.
Even with all these programs, the best way residents can set themselves up for homeownership success is by making sure they have the credit score and credit history needed to qualify for these programs. "Once you improve the credit score, then it opens the door to all these great mortgage programs," says Mary Hunter, director of the housing counseling program at the Housing Initiative Partnership in Hyattsville, Maryland.
[Read: The Guide to Buying a Home.]
If you're looking for first-time homebuyer programs in Maryland, they come in many different varieties. The types of Maryland programs that might help you as a first-time homebuyer include:
-- Mortgage programs.
-- Other financial support targeting aid outside the mortgage.
-- Buyer education courses and workshops.
As you consider your options for buying a home in Maryland, don't forget to explore the nationwide homebuyer programs that are also available to you. For state programs, the most wide-reaching programs will be found through the Maryland Department of Housing and Community Development, which runs the Maryland Mortgage Program and oversees all statewide mortgage assistance.
Federal Mortgage Programs
In addition to state and local first-time homebuyer programs, be sure to take a look at options offered by the federal government, including:
-- U.S. Department of Agriculture loans.
Many of these loans offer options for people with bad credit, as well as low down payment options and loan products that help keep your interest rate low.
1st Time Advantage
This program from the Maryland DHCD is part of the Maryland Mortgage Program, which oversees all statewide mortgage assistance. It offers eligible first-time buyers the lowest interest rate out of any state program for 30-year, fixed-rate mortgages.
There are three ways a buyer may be eligible for this program: He or she must not have owned a home in the last three years, he or she is an honorably discharged veteran who has not previously used the first-time homebuyer exemption or he or she is purchasing the home in an area these programs are targeting to encourage homeownership and does not own another home prior to closing.
The 1st Time Advantage program has three options:
-- The 1st Time Advantage Direct offers the most competitive interest rates available. While down payment assistance isn't provided through this option, an external source of down payment assistance is allowed.
-- The 1st Time Advantage 5000 provides buyers with a 0% loan of $5,000 to help cover the down payment and closing costs, and no payments are due until the mortgage is fully paid off.
-- The 1st Time Advantage 3% Loan is another option that provides 3% of the mortgage amount with 0% interest. These are both considered a second lien on the home, and the loan is due when you refinance, repay or transfer the mortgage, or when you sell the home.
A Flex Direct loan offers competitive interest rates that are applicable to both conventional and government loans through the FHA, VA and USDA.
Other Flex programs include Flex 5000, Flex 3% Loan, Flex 3% Grant and Flex 4% Grant, which offer down payment assistance. The Flex 5000 and Flex 3% Loan are considered second liens and must be repaid eventually with 0% interest, while the grants do not need to be repaid.
Other Financial Support Targeting Aid Outside the Mortgage
Separate from programs that are tied directly to a specific mortgage program, these offerings can help ease the financial burden a down payment or closing costs may have on your savings.
If you're using either the 1st Time Advantage 5000 or Flex 5000 loan programs, you may also qualify for additional assistance through a partner match program. This may come from your participating employer, real estate developers, local organizations or even the local government. A participating partner will provide up to $2,500 for additional down payment assistance to the homebuyer as a no-interest loan, working as a second lien on the home.
This tax credit program allows a homeowner to claim a federal tax credit equivalent to 25% of their mortgage interest payments each year, up to $2,000.
This program has stopped issuing Mortgage Credit Certificates for new reservations, and it's unknown whether it will restart in the future. However, current recipients can still receive the credit, and credit certificates will still be available to current recipients looking to refinance.
This program helps homebuyers who have student debt pay off that debt during the home purchase. Eligible homes for purchase under this program are move-in ready and owned by the state of Maryland. Under the SmartBuy 2.0 program, however, the home does not have to be owned by the state but must meet eligibility requirements, including being located in an area targeted by the state to promote homeownership.
The program provides buyers who have student debt of at least $1,000 with up to 15% of the home purchase price to pay off their outstanding student debt, up to $30,000. The entirety of the student debt must be paid off by the time of the home purchase. If your total student debt is more than 15% of your home purchase price, you're expected to make up the difference on your own to fully pay off the debt prior to closing.
City and County Loan Programs and Down Payment Assistance
In addition to what the state of Maryland offers first-time homebuyers, there are numerous loan and down payment assistance programs available through city and county governments. In many cases, these programs operate in conjunction with the Maryland Mortgage Program, offering additional assistance to the same eligible homebuyers.
You may be able to find program information through an online search of your city or county and "first-time homebuyer programs." Loan officers or your local HUD-approved housing counseling agency can also be helpful resources.
Education Courses and Workshops
Many state programs require completion of a first-time homebuyer class, either in person or online, to qualify for mortgage or down payment assistance. There are multiple options throughout Maryland, and the state's website provides details for available classes. Many nonprofit organizations, counseling agencies and local government departments offer housing counseling in multiple languages as well.
Most first-time homebuyer courses will teach you more than just how to apply for a specific mortgage program. Depending on the class, instructors may also cover how to find a real estate agent, establish a monthly housing budget and the ins and outs of the closing process. HUD-approved housing counseling agencies also offer free one-on-one sessions to review your finances, answer questions and help you feel more confident with the next step in the homebuying process.