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Maryland First-Time Homebuyer Guide 2023

Maryland homes | Maryland First-Time Homebuyer Guide 2023

Teeming with history and situated directly on the water, Maryland offers a diverse range of lifestyle options for homeowners. If you’re thinking about buying your first home in the Old Line State, know that there are a series of first-time buyer programs and mortgage options that can make the journey easier. 

If you think your credit score is too low to buy a home or that you have too much debt to be approved for a mortgage, Maryland may offer a government-backed loan option that fits your needs. Read on to learn more about the benefits of buying a home in Maryland and how to get started finding your first property. 

Benefits of Being a First-Time Homebuyer in Maryland 

Being a first-time homebuyer can come with a series of benefits, including the following. 

  • Statewide down payment assistance: Depending on your income, you could qualify for up to 3% of your home’s purchase price in down payment assistance through the Maryland Department of Housing and Community Development. 
  • Local assistance: In addition to statewide financial assistance, you will find additional homebuyer incentives in many of Maryland’s largest urban areas. Baltimore, Curtis Bay, and Columbia are just a few of the cities where you will find down payment assistance, which may be able to be combined with state-wide programs. 
  • Government-backed loan programs: Maryland lenders participate in government-backed loan options like the FHA and VA loan programs. These loans can make it easier to buy a home with a lower credit score or more debt. 

Qualifications for First-Time Homebuyers in Maryland

Maryland’s state government uses the HUD definition of a first-time homebuyer, which stipulates that you must not have had an ownership interest in a residential property in the last three years. This means that if you have owned a property previously but lost ownership interest more than three years ago, you could still qualify for assistance programs designed for those buying their very first house. 

Questions to Ask Before Buying Your First House in Maryland

Most Maryland residents who think about buying a home want to build equity when making housing payments, which isn’t possible when renting. While home prices in the United States have risen significantly in the past few years, it’s not always a great time to invest. Be sure to ask yourself the following questions before deciding if now is a good time to buy a home. 

1. What are Your Personal Long-Term Goals? 

One of the first things that you will want to consider before starting on the journey towards buying a home is whether the commitment of a mortgage will be an asset or liability. If you’re established in your career and your area, buying a house could be a solid investment for the future, allowing you to move from renting to owning an asset likely to increase in value. However, if you think that your employment or personal commitments will force you to move in the future, a mortgage could become more of a headache than it’s worth. 

2. What is Your Financial Situation?

It’s important to consider whether you’re in a solid financial situation before you commit to a mortgage. Owning a home may involve more expenses than renting, including items like property taxes and homeowner’s insurance, which tend to be more expensive than renter’s insurance because it covers the physical structure of the dwelling. 

If you’re unfamiliar with the full cost of a mortgage and home, you might want to use a mortgage calculator to anticipate expenses. Use current property values in the area you want to buy in to explore what you’re likely to pay per month. This can give you a rough idea of whether your current financial situation can support a home purchase. 

3. What are Your Housing Needs?

Next, think about your housing needs and the features that you want in your next property. Go beyond the number of bedrooms and think about characteristics like design, amenities, and distance to public transportation if you need it to get to work. Writing down your home must-haves can make it easier for your real estate agent to show you homes that fit what you’re looking for when it is time to enter the market. 

4. What is the Real Estate Market Trend?

In addition to your personal goals and finances, it’s also important to consider how real estate trends in your area are moving. If prices are rising, you may want to hold off on buying a home until the market cools off a little. You may also want to track average market interest rates, which are tied to the performance of the American economy, bond interest rates, and overall housing market demand. 

5. What are Your Mortgage Options?

If you’ve been dreaming of buying a home but assumed that your income or credit score would disqualify you, a government-backed loan could be worth exploring. Government-backed mortgage loans are specialized loans with insurance from a specific branch of the federal government. These loans usually have lower credit, debt, and income requirements, which can be beneficial for lower-income residents. Pull your credit score and calculate your debt-to-income ratio to learn more about which loan types you may qualify for. 

First-Time Homebuyer Statistics in Maryland

  • Average home price in Maryland: $404,703
  • Minimum down payment in Maryland: 0% to 3.5%

How to Apply for First-Time Homebuyer Loan Programs in Maryland

If you believe that now is a good time to buy a home, the next step is to apply for home financing. While the process of getting a mortgage might seem intimidating, the truth is that most lenders will have you go through the same basic steps, including the following. 

1. Determine Your Budget 

Before applying for a mortgage loan, it’s important to know that you have the budget to support your mortgage payments. Use the mortgage calculator linked above to set a rough budget for your home search and compare that budget to a few homes on an online real estate database. If it looks like your budget will be able to finance the full cost of homeownership and a mortgage loan, you can move to preapproval. 

2. Get Pre-Approved for a First-Time Home Mortgage

A pre-approval letter is an early agreement to finance your home purchase from a lender. Getting pre-approved for a mortgage loan is an essential step before buying a property because it offers an upper limit on how much money you can borrow. This offers a more concrete budget for your home search. 

Now can also be a good time to apply to one or more of Maryland’s down payment assistance programs for first-time buyers. Statewide down payment assistance is available through the Maryland Department of Housing and Community Development (DHCD), which operates the Maryland Mortgage Program. Some of the programs available to assist with final costs through this program include the following. 

  • Flex 5000: The Flex 5000 program offers a $5,000 loan for down payment and closing costs, which has a zero percent interest rate and is due when you pay off your loan or refinance. 
  • Flex 3%: Similar to the Flex 5000, the Flex 3% program offers up to 3% of the purchase price of your home in a deferred second mortgage due when the current loan expires. 

Note that you must get your mortgage loan through a DHCD-approved lender in order to qualify for down payment assistance. 

3. Hire a Real Estate Agent 

In addition to telling sellers that you’re able to buy a property, a pre-approval letter also tells real estate agents that you’re serious about buying a home. After setting a more solid budget with financing approval, connect with a real estate agent in your area to establish your needs and start the home search. While word-of-mouth endorsements can be a trustworthy source for agent reviews, NAF Homes,* an affiliate of NAF, can also help connect you with qualified professionals in your area. 

4. Start the Search for Your Dream Home

After meeting with your agent, tell them about everything you hope to get out of your home search. Spare no details when it comes to the number of bedrooms, style, design choices, amenities, and other characteristics you need in your new home. The more info your real estate agent has to work with, the more they can refine your search. Remember to communicate a specific budget and let your agent know if you have financial flexibility when it comes to purchase price. 

5. Make an Offer 

When you find a home that you want to purchase, the next step is to submit an offer letter. The offer letter is a proposal to buy a property, submitted to the current owner of the home. Your offer letter will include important details on the sale, including: 

  • Your name and the details of any co-owners on your loan (like a spouse)
  • The proposed purchase price of the home
  • Any repairs or other contingencies you want on the sale
  • Your earnest money deposit and details on your mortgage financing 

Your real estate agent will draft your offer letter with your input. If the homeowner agrees to your offer, you can move to close on your loan and take the final steps toward moving into your new space. 

6. Conduct Home Inspection 

A home inspection is an appointment in which a property condition professional walks through the home that you will be purchasing and notes any areas that might need to be repaired in the future. This gives you an idea of how much you might need to spend on repairs and expenses beyond the homebuying process after you move in. 

Home inspections are important because property damage may not always be obvious when you walk through the home. If an inspection reveals serious underlying issues, it could delay your buying process. Note that the home inspection is not the same thing as a home appraisal, which provides your mortgage lender with a rough idea of the property value but does not make a comment on the condition. 

7. Close the Deal and Become a Homeowner

If your inspection comes back clear, you can move toward the last step of the buying process, the closing meeting. During your closing meeting, your lender will go over your loan paperwork with you one last time and give you a chance to ask any last-minute questions that you might have about funding. You will then pay your down payment and closing costs before seeing the title transferred to your name. When you walk away from closing, you are officially a homeowner. 

5 Traditional First-Time Homebuyer Programs in Maryland

Did you know that there are multiple types of mortgage loans? Government-backed mortgage loans may offer more flexible qualification criteria, making it easier for people with lower income or credit scores to pursue homeownership. 

Conventional Mortgage

The most common type of mortgage loan, Conventional loans, do not have income or location-related restrictions like government-backed loans. While not specifically for first-time buyers, many buyers with solid credit portfolios prefer Conventional loans because they tend to feature lower interest rates. To qualify, you will usually need a down payment of at least 3% and a credit score of at least 620 points. 

FHA Loan

Buyers with lower credit scores or whose debt repayments make up a larger percentage of their monthly income may want to consider buying a home using an FHA loan. With insurance from the Federal Housing Administration (FHA), these loans were introduced to promote homeownership. To qualify, you will usually need a down payment of at least 3.5% and a credit score of at least 580 points with most lenders. 

VA Loan

VA loans are reserved for members of the United States Armed Forces, Coast Guard, and a few select family members of those who have served. The primary benefit of a VA loan is the 0% down payment requirement, which may allow you to buy a home with only enough money to cover closing costs. VA loans also have more lenient income, debt, and credit requirements compared to conventional loans. Qualifications are mostly related to service documentation, which your local VA office can assist with. 


USDA loans were put in place to promote homeownership in rural and suburban areas, allowing you to buy a home with a down payment as low as 0%. To qualify, the home that you plan to buy must meet United States Department of Agriculture (USDA) standards for a rural area. You can search for your property address here to learn if it qualifies. You must also meet income restrictions relative to your area, as well as maintain a credit score of at least 580 with most lenders. 

Closing Assistance Programs

If you aren’t using a DHCD-approved lender to purchase your home, you could still qualify for local down payment assistance from your new town or borough. A variety of Maryland cities have introduced down payment and closing cost assistance programs to promote economic development and investment. For example, low-income residents of Baltimore may qualify for up to $10,000 in financial assistance for their first home purchase through the city’s First-Time Homebuyers Incentive Program. Review local assistance programs in your area to maximize your down payment before closing.  

What Are the Mortgage Rates in Maryland?

Your mortgage interest rate is the price that you pay for your loan, calculated as an annual percentage of your outstanding premium paid to your lender. Monitoring how rates are changing over time can allow you to buy a home when rates are affordable, potentially helping you save thousands of dollars by the time you pay off the loan. 

Investing in the Old Line State

While buying a home may be a solid investment, it’s important to buy at the right time. Review your personal needs, finances, and the housing market in your area before buying. Get pre-approved for a mortgage loan and be sure to consider both Conventional and government-backed loan options. Maryland offers a series of assistance programs on both the state and local level that can make the dream of homeownership closer to a reality. 

Are you interested in learning more about buying a home? Offering both Conventional and government-backed loan options, New American Funding can be a flexible option for Maryland residents.

Frequently Asked Questions

Is There an Income Limit for First-Time Homebuyers in Maryland?

No, there is no income restriction that dictates who can buy their first home in Maryland. While individual mortgage programs may have income-related qualifications, there is no statewide rule that relates income to the ability to purchase a property. 

Can a Person With Low Income buy a House in Maryland?

Yes, a person with low income can potentially buy a house in Maryland using one of the state’s programs aimed at disadvantaged households. For example, Baltimore’s First-Time Homebuyers Incentive Program is reserved for residents classified as low-income within the bounds of the city. A government-backed loan like an FHA loan may also act as an invaluable asset for first-time buyers, 

How Much Does a First-Time Buyer Have to put Down in Maryland?

Most buyers purchasing their first home in Maryland will need to put down at least 3% for their down payment, as this is the minimum for a Conventional mortgage loan. If you qualify for a USDA or VA loan, you might be able to buy a home with $0 down. 

Does Maryland Have First-Time Buyers Programs?

Yes, Maryland offers buyers programs on both the statewide and local levels. The Maryland Department of Housing and Community Development can be an excellent option to begin exploring down payment resources in the state. 

Do you Have to Pay Back Down Payment Assistance in Maryland?

You may need to pay back down payment assistance that you receive depending on how it was issued. For example, if you use the Flex 5000 or Flex 3% program for down payment funds, you must repay what you borrow when you pay off your current loan or refinance. Review your specific program details to learn more about when down payment assistance needs to be returned. 

* NAF Homes, Inc. is an affiliate of New American Funding and does not originate mortgage loans or issue loan commitments.  NAF Homes, Inc. is a MI Real Estate Broker #6505431109, Tel. 844-626-1300.

NMLS #6606. Terms and Conditions Apply.  This is not a loan commitment or guarantee of any kind. Loan approval and rate are dependent upon borrower credit, collateral, financial history, and program availability at time of origination. Rates and terms are subject to change without notice.  All mortgage loan products are subject to credit and property approval.  © New American Funding, LLC. New American and New American Funding are registered trademarks of New American Funding, LLC. All Rights Reserved. Corp Office 14511 Myford Rd, Ste 100, Tustin, CA 92780. Ph 800-450-2010. 

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