As the rental market becomes more competitive, monthly rental payments are being driven higher and higher, which has more people considering purchasing a home instead of renting. As this shift has occurred, I’ve noticed most home shoppers are surprised by how much buying power their income will allow them. For example, a person making a salary of $60,000 with a moderate amount of monthly debt, in most cases, can qualify for a mortgage payment of $1800 per month. Financing with a minimum payment FHA loan, this would put their homebuying budget in the $250,000 price range, which is typically more than they would expect. Commonly, the only thing standing in the way of this purchasing power is the down payment and closing costs needed to secure a loan. Thankfully, there are a number of Down Payment Assistance (DPA) programs available to buyers in the state of Maryland that will help eliminate this challenge.
The greatest obstacle first-time buyers must overcome is saving enough money for the down payment and closing costs. Even at the minimum down payment of 3 percent of the sales price, many struggle to put the money aside. What some don’t realize, however, is that assistance is available. The Maryland Mortgage Program (MMP) offers first-time homebuyers up to $5,000 toward down payments. This amount is contributed in the form of a 0 percent interest second trust that is not due for repayment until the home is sold or refinanced. Approved employers, including many local government employers, and home builders can match up to $3,500 on top of that as well! With this MMP program, there are income limits for each county that depend on the size of household. There also can’t be evidence of homeownership in the last three years.
Baltimore City homebuyers may have access to down payment assistance from several grant and bond programs in the area. Some of the more commonly-used programs are the Good Neighbor and Community Development Block Grants. While each is subject to their own requirements and conditions, these programs may provide an additional $5,000 in help.
Lastly, when negotiating a home purchase, a buyer can ask the seller to help with the buyer’s closing costs. Obviously this must be considered when deciding how an offer is going to compare to the property’s list price, as a seller will need to net a certain amount to make the sale worthwhile. Paired with Down Payment Assistance, you can get into a home with very little cash.
Don’t allow saving for a down payment keep you from the opportunity of homeownership. Explore all of your budgeting options, the available down payment assistance programs, and loan options to make an informed decision. I recommend our Guide to Home Financing as an excellent starting point for even more mortgage tips.
Topics: Buying a Home