Bidding wars, skyrocketing prices, limited inventory, and high demand have made the housing market a challenging one for home buyers. Low interest rates and the flexibility to work from home mean many first-time homebuyers are looking for their first home.
By now, you might be feeling discouraged and ready to throw in the towel. Not only is finding an affordable home you love tough but coming up with a down payment and closing costs seems impossible. But what if we told you there is good news?
For starters, most real estate experts predict a more “normalized” market shortly as prices moderate and bidding wars ease, making it better for buyers like you. And if you’re a first-time home buyer in Maryland, we’re happy to announce help with funds for the downpayment and closing costs.
Snapshot of The Maryland Real Estate Market
Maryland is broken down into five distinct areas: Western, DC Metro, Central, Southern, and Eastern Shore. The DC Metro area comprises three counties, Frederick, Montgomery, and Prince George’s. This area is the most educated and well-to-do area in the US and has a population of over 6 million people.
Because the DC metro area has the highest population and density, let’s focus our attention there.
Located in the northern part of Maryland, Frederick County has a population of about 260,000 and is included in the DC-VA-MD-WV Metropolitan Statistical Area. The county seat is Frederick.
Like other sections of the DC metropolitan area, Frederick County is experiencing rapid population increases, making buying a home challenging. Homes sell in an average of 17 days (as of December 2021)
Frederick County is home to the Camp David retreat in Catoctin Mountain Park and the Army’s Fort Detrick.
Median Home Value: $331,000
Located next to Washington, DC, Montgomery County is the most populous county in Maryland. The 2020 census has the population at about 1,062,000, almost a 10% increase from 2010.
The county seat is Rockville, and Germantown is the most populous city. Like Frederick County, Montgomery County is included in the DC–VA–MD–WV metropolitan statistical area, but most of the county’s residents live in unincorporated areas.
The county is one of the wealthiest in the United States.
Median Home Value: $484,900
Prince George’s County
Prince George’s County is the second-most populous county in Maryland, with 967,201 residents. It borders the eastern portion of Washington, D.C. The area has seen an influx of residents with an increase of 104,000 people over the past ten years.
The county seat is Upper Marlboro, the most prosperous African American-majority county in the United States. Counted as part of the Washington metro area, the county is also home to many federal government facilities, including Joint Base Andrews and the US Census Bureau headquarters.
Median Home Value: $394,870
First Time Home Buying In Maryland Loan Options
Financing is probably the most confusing and frustrating part of buying a home, especially if you’re a Maryland first-time homebuyer. It’s almost easier to jump through flaming hoops while walking a high wire than follow all the rules and regulations of getting a mortgage loan.
Suppose you’re able to put at least 20% of the purchase price down. In that case, it makes it much easier to get a more straightforward conventional loan with a competitive interest rate–and you won’t have expensive private mortgage insurance (PMI).
Of course, if you’re like most first-time buyers, you haven’t saved enough for 20% down. However, you don’t need that much down. Not even close.
You can usually get into a new home with as little as 3% (or even 0%) down using one of these low-down-payment mortgage programs:
- 3.5% down payment with a 580 minimum credit score
- 10% down payment with a credit score of 500-579.
- Requires mortgage insurance
- Backed by the Federal Housing Administration
- Insures loans on single-family and multi-family primary residences.
- Must have steady income and proof of employment.
- Only for veterans and service members, reservists, and National Guard.
- 0% down payment is required.
- The minimum credit score is often 580 to 620, but varies by lender.
- VA Funding Fee of 1.65% for first-time homebuyers. Can be financed.
- No ongoing mortgage insurance after closing.
- For low-to-moderate income buyers in designated rural areas.
- 0% down payment is required.
- Interest rates for very low-income buyers can be as low as 1%
- Credit scores above 640 receive faster, streamlined processing. Below that score requires stringent underwriting.
- Low mortgage insurance rates
- Insured by Freddie Mac or Fannie Mae for first-time homebuyers only.
- 3% down payment
- 620 minimum credit score.
- May stop paying mortgage insurance after a few years.
- Competitive interest rates.
- May be used with down payment assistance.
- Can help minimize out-of-pocket requirements, depending upon the mortgage loan chosen.
- Cover down payments and closing costs with a homebuyer assistance program or money that was gifted.
- Programs to help reduce student loan debts
- For Maryland homebuyers only.
Maryland Mortgage Program Offers Buyers Incentives
Being a first-time homebuyer puts you in a great position with the Maryland Department of Housing and Community Development’s Maryland Mortgage Program. This program offers various options for making a first home purchase within your grasp with a down payment and closing cost assistance of up to $25,000.
According to the DHCD, the “Loan terms are competitive with other home loan products on the market, but what makes MMP unique is the range of associated financial incentives and other assistance that, for many homebuyers, means the difference between being able to purchase and continuing to rent.”
Additionally, “MMP down payment assistance can only be obtained with an MMP first mortgage; it is not a stand-alone option. “
This means that you first need to get a DHCD mortgage if you’re looking for some down payment assistance. You’ll need to:
- Purchase a home in Maryland.
- Check out and choose one of the 80 lenders taking part with DHCD.
- Participate in a buyer education course.
- Meet the household income requirements.
- You can not own any other real estate.
- Make the property you are purchasing your primary residence.
Each mortgage program will have its nuances, so beyond the six baseline criteria requirements, you’ll have to look deeper into the one you’re considering. At this point, you won’t want to commit to a particular lender. Finding the best one to suit your needs may take some apples-to-apples comparison.
Maryland First-time Home Buyer Grants
The Maryland DHCD offers a variety of down payment assistance programs:
- Flex 5000 Loan— A generous $5,000 no-interest loan with the bonus of no monthly payments. The original $5,000 must be repaid at the conclusion of your first mortgage.
- Flex 3% Loan — This allows you to borrow 3% of your primary mortgage with the same terms as the Flex 5000 loan.
- Flex 4% Grant — A grant at 4% of your principle mortgage amount that you never need to repay.
- Flex 3% Grant — A great option in which you will receive a grant for 3% of your mortgage loan amount that you never need to repay.
After weighing out these grants, the 4% Grant would be the most attractive option. More money with no need to repay, that’s a win. Because it’s so inviting, the eligibility requirements will be more challenging, but if you qualify, this is a great way to remove some of the financial burdens.
Maryland SmartBuy Aids With Student Debt
Homebuyers with considerable student loan debt can benefit from the SmartBuy 3.0 program. To qualify, its website says that:
“Homebuyers must have an existing student debt with a minimum balance of $1,000. Maryland SmartBuy 3.0 financing provides up to 15% of the home purchase price for the borrower to pay off their outstanding student debt with a maximum payoff amount of $30,000.”
You’ll find the SmartBuy program through the approved lenders, and once again, the special eligibility is something to consider.
Don’t forget that the DHCD mortgage assistance programs like Flex loans, grants, and SmartBuy will only be available to you if you use the Maryland Mortgage Program.
There may be other local DPA options if you aren’t using the MMP, so it’s worth looking into
county, city, or local level programs that work your current type of home loan. Contact your loan officer for help to apply for programs that you may qualify for.
The Bottom Line
As you can see, the competitive housing market combined with low-interest rates isn’t all doom and gloom for first-time home buyers. With the Maryland Mortgage Program, an array of loan and grant options can equip you with the edge you need to be a first-time home buyer in Maryland.
Join us for a free, no-obligation webinar, so you can see just how easy–and profitable–the process can be. Don’t let the lack of a down payment hold you back any longer. You deserve to find out how homeownership can be in your future! Join us for a free, no-obligation webinar, so you can see just how easy–and profitable–the process can be.