DPA Options

For many Maryland buyers, saving for the down payment is the biggest hurdle between renting and owning. The good news is that Maryland offers down payment assistance at three different levels: local programs, state programs, and national programs. The challenge is that these programs are not one size fits all. Some are forgivable after a few years, some must be repaid when you refinance or sell, and others are only available in certain counties or for first time buyers.

Local Options

Let's start with the local options, these are usually offered at a county level. However, we do find some niche programs available in smaller cities around the state. Let's talk about some of the downpayment assistance programs found around Maryland.

Baltimore City

We are truly fortunate he in Baltimore to have some of the best downpayment assistance options available to us in the entire nation. The City offers multiple incentives for lots of different types of buyers in all walks of life.

The Baltimore City First Time Homebuyer Program typically provides between $10,000 and $20,000 or more for down payment and closing costs. In most cases, the assistance is structured as a forgivable loan over five years, meaning you may not have to repay it if you stay in the home long enough. The positives are obvious: less money out of pocket and a lower barrier to entry. The downside is that there are income limits and occupancy requirements, and if you move or refinance too quickly, you may owe part of the assistance back.

Baltimore City employees can also qualify for additional assistance through the Baltimore City Employee Homeownership Program. This program is available to full time City and quasi-City employees and helps reduce the upfront cash needed to buy. One major positive is that there are no traditional income limits. The drawback is that you must stay in the property as your primary residence and meet employment requirements. These loans are often forgiven gradually over a five-year period.

Baltimore City also offers extra incentives for buyers with disabilities or households receiving SSDI. In some cases, buyers may qualify for an additional $5,000 bonus if they have a disability or are purchasing a home they have rented for at least six months.

The Vacants to Value program is one of the more unique options in Maryland. Buyers can receive a $10,000 booster when purchasing a property that has been recently renovated by a City approved contractor/investor. This incentive is a win-win for both the seller and the buyer as long as the seller has followed all of the rules associated with the program.

Live Near Your Work is another Baltimore City favorite. This program helps employees of participating employers purchase homes near where they work in Baltimore City. The benefit can be used toward down payment or closing costs. This is a unique program that it's a mix of money that's given. Majority of the funds come from the employer in the form of a payroll bonus and the remainder comes from the city in the form of a grant. This is definitely one to consider if you are an employee of Johns Hopkins or University of Maryland.

The Baltimore City programs require the buyer to attend a HUD approved housing counseling prior to submitting an offer on the property they are purchasing. In most cases they require the buyer to use at least $1,000 of their own funds to purchase the property.

Baltimore County

Baltimore County's Settlement Expense Loan Program, commonly called SELP, provides assistance to low and moderate income first time buyers. Assistance can often be used for both down payment and closing costs. Repayment is usually deferred until sale, refinance, or transfer of the property. This program requires a HUD approved consoling course to be completed prior to going under contract and does have income restrictions.

LifeBridge Health also has a version of Live Near Your Work for employees that live in Baltimore County. This program functions similar to the City's version of Live Near Where You Work, offering a payroll bonus and grant money from the county.

Harford County

Harford County has its own SELP program with a similar structure. It is designed for first time homebuyers and often records a lien against the property deferring repayment until the homeowner sells or refinances. Depending on where you are purchasing in Harford County, that assistance can be up to $20,000. This program requires the buyer must contribute at least 1% of the sales price to the transaction. It also requires a HUD approved consoling course to be completed prior to going under contract and does have income restrictions.

PG County

Prince George's County Pathway to Purchase is one of the strongest local programs in the state. Buyers may qualify for up to $50,000 through Maryland Mortgage Program partnerships. The program is especially attractive because the loan decreases by 10 percent per year and is fully forgiven after 10 years. Funds for this highly demanded program often run out quickly, making timing essential when trying to navigate this program. Other notes about this program, it requires homebuyers to be below median income levels, the completion of a HUD approved counseling course, and working with a program approved lender like us here at PRMG.

Hagerstown

In Western Maryland, The Hagerstown's Homeownership Initiative has been providing $7500 grants to first time home buyers purchasing homes in their downtown district. These are structured as loans and are forgiven if the homeowner remains in the home for five years.

The Maryland Mortgage Program

At the state level, the Maryland Mortgage Program is often the backbone of down payment assistance. For first time buyers, the program offers several options including a flat $6,000 second lien, or assistance equal to 3%, 4 %, or even 5% percent of the first mortgage amount. These are typically zero percent deferred second liens with no monthly payment. Repayment is due when the home is sold, refinanced, or paid off. Repeat buyers can still use MMP Flex products, including the $6,000 option and the 3 percent option. They even have options for non-first-time home buyers!

For buyers with student debt, Maryland SmartBuy can be especially attractive. These programs can provide down payment assistance while also helping pay down student loans, sometimes up to $20,000.

These programs are available across Maryland. They do have income requirements that vary depending on which part of the state you are purchasing in. They also require HUD approved counseling prior to closing on the home purchase. Interest rates are set at a state level and all lenders that participate in the program will have the same rates and terms.

National Programs

Finally, there are national down payment assistance options like the National Homebuyer Fund (NHF) and Chenoa. The National Homebuyer Fund (NHF) is a non-profit that focuses on providing down payment assistance to homebuyers across the US. They offer three assistance structures. The first is a 3.5% forgivable second mortgage that carries no interest or monthly payment and is forgiven after three years if the borrower keeps the home as their primary residence. The second is a 3.5% repayable second mortgage with a 10-year term and monthly payments. The third is a 5% repayable second mortgage, also structured over 10 years, which provides more upfront assistance but results in a larger second lien payment.

Similar to the NHF is a program called Chenoa. Chenoa is available nationwide through participating lenders and has no income limits. The program offers four assistance options: a 3.5% forgivable second mortgage, a 5% forgivable second mortgage, a 3.5% repayable second mortgage, and a 5% repayable second mortgage. The forgivable options carry no monthly payment and are forgiven after thirty-six consecutive on-time payments on the first mortgage, while the repayable options are structured as 10-year second mortgages with interest rates above the first mortgage note rate. Funds can be used toward down payment, closing costs, prepaid items, and other eligible mortgage expenses. Both of these programs are available in multiple states and can often be paired with FHA financing.

The biggest takeaway is that there is rarely just one source of down payment assistance. Many buyers can combine local, state, and even national programs together. That can mean the difference between needing tens of thousands out of pocket and getting into a home with far less cash than expected. Keep in mind, nothing in life is free, the biggest drawback to most down-payment assistance is the rigidity the occurs after you close. If the market changes and you would like to take advantage of a refinance, funds that may be due back to the agency that lent it to you, keeping you stuck in a loan with a higher rate. This is just one reason why having the right plan based on your long-term goals will always beat getting what's best available right now.