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First Time Home Buyers
Maryland First Time Home Buyer Programs
Summary Overview
First Time Home Buyers in Maryland have several sources of assistance available when purchasing a home. The Federal, State of Maryland, Maryland Counties and the local city governments as well as private organizations administer the programs. The practicality of using any of the programs to assist you in purchasing a home depends upon the focus of the program and additional qualification restrictions established by the organization responsible for administering the program.
In order to review and understand how you might benefit from the programs, you must first be able to understand the differences in the way the different organizations define the term "First Time Home Buyer" as it applies to each program.
The First Time Home Buyer programs benefit the buyer in three basic areas; obtaining a purchase money mortgage, assistance with the payment of a down payment and closing costs and an exemption in the payment of the State Transfer Tax charged at settlement.
The information about the First Time Home Buyer programs is organized in the following sections: Maryland State Transfer Tax Exemption, Purchase Money Mortgages and Down Payment and Closing Costs Assistance. (1) The Maryland State Transfer Tax Exemption applies to all First Time Home Buyers purchasing a home in Maryland, regardless of the County in which they will reside. (2) The State of Maryland and County administrators organize the Purchase Money Mortgage Programs and (3) the Down Payment and Closing Costs Assistance Programs as they can and do differ in availability and qualification criteria from area to area.
Maryland State Transfer Tax Exemption
The Buyer is exempt from paying .25% of the Maryland State Transfer Tax (,5% of the sale price) if the Buyer qualifies as a First Time Home Buyer under the State definition.
As an example of how the exemption is applied, it is customary in Maryland in the sale of an existing home for the State Transfer Tax to be split equally between the Buyer and the Seller. If the purchase money mortgage of the home were $100,000, the Buyer and Seller would each pay $250.00 at closing. However, if the Buyer is a First Time Home Buyer under the State definition then the Buyer is exempt from paying their half of the tax. The Seller would still pay their half of the tax ($250.00 in this example). If the contract of sale contains a statement whereby the Buyer agrees to pay the full .5% (or $500.00 in this example) of the State Transfer Tax; then, the Buyer will only be exempt from paying half of the tax as if it were equally split between both parties and the Buyer WILL have to pay half of the tax (i.e. the other $250.00).
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Purchase Money Mortgages
The Maryland Mortgage Program (MMP) provides low-interest mortgage loans to eligible homebuyers with low- to moderate-income households through private lending institutions throughout the State.
Counties may receive an allocation of tax-exempt mortgage revenue bond authority every year, based on population, from the Federal government. Some counties choose to transfer their authority to issue these bonds to the Community Development Administration (CDA). CDA issues tax exempt mortgage revenue bonds On-Behalf-Of (commonly referred to as OBO) local jurisdictions through MMP. Applicants may apply for either OBO funds or Statewide funds (commonly referred to as Non-OBO Funds), depending on how their needs are met by the income limits and maximum acquisition costs for each funding type. Authority to issue Non-OBO funds is received from the Federal government based upon population. First time homebuyers are required to attend homeownership counseling. Review this list of HUD Approved Housing Counseling Agencies in Maryland. The Purchase Money Mortgage Program Criteria that outlines the eligibility requirements follow:
Non-Profit Organizations
Under some purchase money mortgage programs where there is a requirement for the Buyer to use their own funds toward payment of some of the down payment and closing costs, contributions from non-profit organizations are considered an alternative and acceptable source of Buyer funds. In this area, the mortgage loan program most often used as the source of purchase money mortgage funds is an FHA insured loan. Under HUD a charitable organization is referenced in the HUD Handbook 4155.1 Rev 4, Section 2-10.
Some of the non-profit organizations require some form of Seller participation in the non-profit organization's program of home ownership or counseling and/or also require that the home purchased meet or exceed specified levels of habitability before the non-profit organization will gift funds on behalf of the Buyer. Here are some of the organizations (listed in alphabetical order) that are active in this area and qualify as a non-profit organization recognized as tax-exempt under the Internal Revenue Code Section 501(c)(3).
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A Final Thought for You
This is not an all-inclusive list of first time home buyer programs for purchase money mortgages or for down payment and closing costs assistance in the State of Maryland. This section does cover many of the most widely used programs. Baltimore City and several other local governments may have additional programs from time to time that are not covered in this section. You are encouraged to contact the housing and community developement authority of the local government with jurisdiction over the area in which you would like to purchase a home. Additionally, it is also a good idea to contact the authorities overseeing the programs presented above to ensure that the information provided here is current. The dynamic nature of the programs require frequent change in order that the programs remain viable and relevant in satisfying the needs of the First Time Home Buyers as intended.
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