First-Time Homebuyer Programs for Maryland Residents in 2020

These loan, payment assistance and education programs may help you buy a home this year.

U.S. News & World Report

Homebuyer Programs for Marylanders

Rear View Of Loving Couple Walking Towards House

The median home value of owner-occupied homes in Maryland from 2014 to 2018 was $305,500.(Getty Images)

You've saved up for a home for years, but even with low mortgage rates and less competition for properties, you worry about affording both the down payment and the monthly costs that come with homeownership.

If you live in Maryland, know that owning a home in the state isn't cheap. The median home value of owner-occupied homes from 2014 to 2018 was $305,500, according to the U.S. Census Bureau, compared to the national median of $204,900. For Maryland homeowners with a mortgage, median monthly costs, which include insurance, utilities, homeowners association fees and more, were $1,987 during that period, more than $400 above the national median.

Luckily, Maryland residents not only have federal loan programs, but 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.

Here are nine types of first-time homebuyer programs for Maryland residents:

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 Federal Housing Administration loans, loans from the U.S. Department of Veterans Affairs and loans from the U.S. Department of Agriculture. 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 Department of Housing and Community Development 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 program 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.

One option in the 1st Time Advantage program provides buyers with a zero percent loan of $5,000 to help cover the down payment and closing costs. The 1st Time Advantage 3% Loan is another option that provides 3% of the mortgage amount with zero percent 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.

Flex Loans

A Flex Direct loan offers competitive interest rates that are applicable to both conventional and government loans through the FHA, VA and USDA. Additionally, borrowers utilizing these programs are able to take advantage of the Maryland HomeCredit, which is a tax credit.

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 zero percent interest, while the grants do not need to be repaid.

Partner Match

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.

Special Assistance Grant

If you're purchasing a home with a Freddie Mac HFA Advantage conventional mortgage, you may qualify for this state grant aimed at helping you cover the down payment and closing costs. Borrowers with an income that does not exceed 50% of the area median income can qualify for $2,500, while those with an income between 50% and 80% of the area median income can receive $1,500.

These eligibility requirements are common among other programs throughout the state, but Hunter notes that they include more people than you may think. In the 2019 fiscal year, single-person households earning $42,500 in the Maryland parts of the Washington, D.C., metro area qualified for the $2,500 special assistance grant. In the same area, a family of four bringing in $77,600 annually would still qualify for the $1,500 special assistance grant, based on the local area median income.

Grants don't have to be repaid, and they can be combined with other down payment assistance loans or grants, as well as with other government loans, as long as they don't remove your eligibility for the Freddie Mac Advantage conventional mortgage.

Maryland HomeCredit

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. Even if you take the standard deduction and don't itemize on your tax return, the credit reduces the total taxes you owe.

Maryland SmartBuy

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. 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.

First-Time Homebuyer Classes

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 classes depending on where you live. 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 one-on-one sessions for free to review your finances, answer questions and help you feel more confident with the next step in the homebuying process.

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