Last Updated: August 2026 Estimated Reading Time: 14 minutes
Buying your first home can feel confusing. You may be wondering whether you need a 20% down payment, whether your credit score is good enough, whether help is available for your down payment or closing costs, or which type of loan may work for you. This guide explains Maryland First-Time Home Buyer Programs and other financing options in simple, everyday language. You do not need to understand banking or real estate terms before reading it.
For a complete explanation of the entire buying process, read: How to Buy a Home in Maryland: A Complete Step-by-Step Guide. It explains preparing your finances, finding a home, inspections, appraisal, closing, and receiving your keys.
Who Is Considered a First-Time Home Buyer in Maryland?
Many people think a first-time home buyer must be someone who has never owned a home. That is not always true.
For the Maryland Mortgage Program, you are generally considered a first-time home buyer if you have not owned residential property during the previous three years. The program also has exceptions for certain veterans and buyers purchasing in designated Targeted Areas. Income, property, occupancy, and other requirements still apply.
In simple terms: You may have owned a home many years ago and still qualify as a first-time buyer today.
Because every program has its own rules, speak with a participating lender before assuming that you qualify – or that you do not qualify.
What Is a Mortgage?
A mortgage is money you borrow from a bank or mortgage lender to buy a home. Most people do not have enough cash to pay the entire price of a home at once. The lender pays most of the price, and the buyer agrees to repay the money over time.
For example:
The home costs $400,000.
You pay part of the price using your own money.
The lender provides the remaining money.
You repay the lender through monthly payments.
Your mortgage payment may include more than the loan itself. It can also include property taxes, homeowners insurance, and mortgage insurance, depending on your loan.
How Much Money Do You Need to Buy a Home?
The amount you need depends on whether you are buying with a mortgage or paying cash. Let us look at both.
Buying a Home With a Mortgage
When you use a mortgage, you usually need money for two major items:
1. Your Down Payment
A down payment is the part of the purchase price you pay using your own money. For example, if you buy a home for $400,000, you may pay part of that amount while the lender finances the rest.
The required down payment depends on:
The loan program
Your credit and financial profile
The lender’s rules
The type of property
Whether you qualify for assistance
You do not always need 20% down. Some qualified borrowers may purchase with a much smaller down payment, and certain VA and USDA borrowers may qualify for no-down-payment financing. FHA financing may permit a down payment as low as 3.5% for eligible borrowers.
2. Your Closing Costs
Closing costs are the extra costs required to complete the purchase and transfer the home into your name. They are separate from your down payment.
Closing costs may include:
Lender fees
Appraisal fees
Title search
Title insurance
Government recording charges
Taxes
Homeowners insurance
Prepaid property taxes
Prepaid interest
Initial escrow deposits
Closing costs commonly range from about 2% to 5% of the purchase price, although the actual amount can be higher or lower depending on the transaction.
What Is Cash to Close?
Your cash to close is the total amount you must bring to settlement after accounting for your down payment, closing costs, deposits already paid, lender credits, seller assistance, grants, and down payment assistance.
Your lender’s Loan Estimate and final Closing Disclosure should show your expected cash to close.
Other Expenses to Plan For
Do not use all your available savings for the purchase. You may also need money for:
Moving expenses
Utility deposits
Furniture
Appliances
Repairs
Maintenance
Emergency savings
A lender may approve you for a certain amount, but that does not mean you must spend the maximum amount. Choose a monthly payment you can manage comfortably.
Buying a Home With Cash
Buying with cash means you pay the full purchase price without borrowing from a mortgage lender. For example, if the home costs $400,000, you pay the full $400,000 using your available funds. There is no mortgage and no monthly loan payment.
However, cash buyers still have closing expenses. These may include:
Title search
Owner’s title insurance
Settlement fees
Recording fees
Transfer taxes, where applicable
Home inspection
Survey, if needed
Homeowners insurance
Property taxes or prorated expenses
Proof of Funds
A seller will normally want to see proof of funds with a cash offer. Proof of funds is a document showing that you have enough available money to complete the purchase. It may be a recent bank or investment account statement, with sensitive account details covered.
Should a Cash Buyer Still Get an Inspection?
Yes. A home inspection is a professional review of the home’s visible condition. It may reveal problems involving the roof, plumbing, electrical system, foundation, heating, cooling, moisture, or other areas. Paying cash does not protect you from buying a property with serious problems.
Should a Cash Buyer Still Use a Title Company?
Yes. The title company or settlement professional checks the property’s ownership history and looks for issues such as unpaid liens, ownership disputes, unreleased mortgages, recording mistakes, and other title problems. Cash buyers should also consider owner’s title insurance, which may protect against certain covered ownership problems discovered after closing.
Is Cash Always Better?
Not necessarily. A cash offer can be attractive because there is no lender approval or financing contingency. However, using a large amount of cash may leave the buyer with less money for emergencies, repairs, investments, or other goals. The better choice depends on your finances and long-term plans.
What Is the Maryland Mortgage Program?
The Maryland Mortgage Program, commonly called MMP, offers mortgage options to eligible Maryland home buyers.
Its offerings may include:
MMP 1st Time Advantage, designed for eligible first-time home buyers
MMP Flex, which may be available to eligible first-time and repeat buyers
Down payment and closing-cost assistance options
Specialty programs for certain borrowers or locations
The program generally uses 30-year fixed-rate mortgages. A fixed rate means your mortgage interest rate does not change during the loan term.
Eligibility may depend on household income, household size, property location, purchase price, whether the home will be your main residence, and your lender’s underwriting requirements.
For current details, visit the official Maryland Mortgage Program website and speak with an approved participating lender.
What Is Down Payment Assistance?
Down payment assistance is money that helps an eligible buyer cover some of the upfront cost of purchasing a home. Depending on the program, the assistance may help with the down payment, closing costs, or both.
Many MMP products offer down payment assistance to eligible first-time or repeat buyers. The specific amount and repayment terms depend on the selected product.
Is Down Payment Assistance Free Money?
Not always. Some assistance is a grant. Other assistance is a loan. That is why you must understand the terms before accepting it.
Grant vs. Assistance Loan
| Type | Simple meaning |
| Grant | Money you may not have to repay, provided you follow all program requirements. |
| Deferred loan | Money you borrow now but usually do not make monthly payments on immediately. Repayment may become due when you sell, refinance, pay off the first mortgage, or stop using the property as your main home. |
| Forgivable loan | A loan that may be reduced or forgiven after you satisfy certain requirements for a specified period. |
Ask the lender: Is this a grant or a loan? Is interest charged? Are monthly payments required? When must it be repaid? What happens if I sell or refinance?
Common Home Loan Programs
FHA Loan
An FHA loan is a mortgage insured by the Federal Housing Administration. The government does not usually lend the money directly. Instead, FHA insurance protects the approved lender against certain losses, making it easier for lenders to serve more borrowers.
An FHA loan may be helpful for qualified buyers who need a lower down payment, more flexible credit guidelines, or a loan for a one- to four-unit primary residence. Eligible FHA borrowers may put down as little as 3.5%. FHA loans generally include mortgage insurance, which adds to the borrowing cost.
Learn more through HUD’s FHA home-loan information.
Conventional Loan
A conventional loan is a mortgage that is not insured by FHA, VA, or USDA. It may work well for buyers with stable income, good credit, manageable debt, and money for the down payment and closing costs.
Some conventional programs permit down payments below 20%. When a buyer puts down less than 20%, the lender may require private mortgage insurance, commonly called PMI. PMI helps protect the lender if the borrower stops making payments. It does not provide home-repair coverage for the buyer.
VA Loan
A VA loan is available to eligible veterans, active-duty service members, and certain surviving spouses. Qualified borrowers may receive benefits such as no required down payment in many cases, competitive interest rates, limited closing costs, and no monthly private mortgage insurance. Eligibility and property requirements apply.
Learn more through the official VA Home Loans website.
USDA Loan
A USDA loan can help eligible buyers purchase homes in qualifying rural areas. Qualified borrowers may receive no-down-payment financing, a 30-year fixed-rate loan, and financing through an approved lender. Both the buyer and property must qualify. Income and location rules apply.
Learn more through the official USDA Single Family Housing Guaranteed Loan Program.
Other and Creative Financing Options
Traditional FHA, conventional, VA, and USDA loans are not the only possibilities. Some buyers have unusual income, employment, asset, or investment situations. Certain lenders offer alternative financing products. Not every lender offers these loans, and they may have higher rates, larger down-payment requirements, or stricter terms.
Bank Statement Loan
A bank statement loan is often used by self-employed borrowers. A traditional lender may focus heavily on tax returns. However, self-employed people often claim legitimate business expenses that lower the income shown on their tax return.
With a bank statement loan, the lender may review 12 to 24 months of personal or business bank statements to estimate income. In simple terms, the lender studies how much money regularly enters your account to decide whether you can afford the loan. These loans may have higher rates or require more money down than a standard mortgage.
Verification of Employment Loan
Some lenders offer programs that rely more heavily on verification from the borrower’s employer. Verification of employment, or VOE, means the lender contacts your employer to confirm that you work there, your job status, your income, and how long you have worked there.
The exact documentation still depends on the lender and loan program. Employment verification only does not mean everyone qualifies without financial review.
Asset Depletion Loan
An asset depletion loan may help someone who has substantial savings or investments but does not receive a large regular paycheck. The lender may examine savings, investment accounts, retirement funds, and other eligible liquid assets. The lender then uses a formula to estimate how much monthly income those assets could support. This may be useful for some retirees or financially independent buyers.
DSCR Loan
A Debt Service Coverage Ratio loan, or DSCR loan, is mainly used for rental investment properties. Instead of focusing primarily on the investor’s personal employment income, the lender examines the property’s expected rent.
The basic question is: Will the rent from the property be enough to cover the property’s loan payment and related housing expenses? DSCR loans are generally investment-property loans, not first-time buyer assistance for a primary home.
Seller Financing
Seller financing means the person selling the property lends money to the buyer. Instead of getting the full purchase money from a bank, the buyer signs an agreement to pay the seller over time.
The agreement should clearly state the purchase price, down payment, interest rate, monthly payment, loan length, late-payment rules, whether there is a balloon payment, and what happens if the buyer fails to pay.
Seller-financed arrangements can be complicated and may be subject to consumer-credit rules, so both parties should obtain appropriate legal and financial advice. Be especially careful with a contract for deed. In that arrangement, the seller may keep legal title until the buyer completes all payments.
Hard Money Loan
A hard money loan is usually a short-term loan from a private lender or investment company rather than a traditional bank.
Hard money loans are often used by:
Real estate investors
House flippers
Buyers purchasing damaged properties
Buyers who need to close quickly
Buyers purchasing properties that may not qualify for normal financing
The lender usually focuses heavily on the property’s value and the borrower’s plan for the property.
Why Are Hard Money Rates Higher?
Hard money loans commonly have higher interest rates and fees because the lender may be accepting more risk, the property may need major repairs, the borrower may not meet traditional bank standards, the lender may provide the money very quickly, and the loan is usually intended for a short-term investment project. The higher rate and fees compensate the private lender for the added risk and faster process.
How Do the Monthly Payments Work?
Many hard money loans use interest-only payments. An interest-only payment covers the lender’s charge for allowing you to use the money. It does not normally reduce the original amount you borrowed during the interest-only period.
Example:
You borrow $300,000.
You make monthly interest-only payments.
After making those payments, you may still owe the original $300,000.
What Is a Balloon Payment?
At the end of the short loan term, the full remaining balance may become due in one large payment. That large final payment is called a balloon payment.
What Is Refinancing?
Refinancing means getting a new loan to pay off your old loan. For example:
An investor uses hard money to purchase and repair a property.
After the repairs, the property may be worth more and may qualify for regular financing.
A traditional lender provides a new mortgage.
The new mortgage pays off the hard money loan.
The investor begins making payments on the new mortgage.
Why Is an Exit Strategy Important?
Before taking a hard money loan, the borrower should know how the loan will be repaid. Common exit strategies include selling the renovated property, refinancing into a longer-term mortgage, or paying off the loan using other available money.
Hard money loans can be useful, but they may also contain costly or risky features such as interest-only payments, balloon payments, or prepayment penalties. Compare all written terms carefully with less risky alternatives.
Why Your Credit Matters
Your credit history shows how you have handled borrowed money and bill payments. A stronger credit profile may help you qualify for more loan programs, receive a lower interest rate, reduce your monthly payment, reduce certain insurance costs, and increase your purchasing options.
Less-than-perfect credit does not automatically mean you cannot buy. Speak with a lender before deciding that you do not qualify. A lender can explain where you stand and what steps may help you improve.
Documents a Lender May Request
A mortgage lender may ask for:
Government-issued identification
Social Security number
Recent pay stubs
W-2 forms
Tax returns
Bank statements
Employment history
Information about debts
Retirement or investment statements
Documentation for gift funds
Explanation of large bank deposits
The lender uses these documents to answer a simple question: Can this buyer reasonably afford to repay the loan? Do not move large amounts of money or make unusual deposits without keeping clear records.
Common First-Time Buyer Mistakes
Shopping Before Getting Pre-Approved
A pre-approval helps you understand your likely budget before you become emotionally attached to a home.
Buying a Car Before Closing
A new car loan can increase your debt and reduce the mortgage amount for which you qualify.
Opening New Credit Cards
New credit can affect your score and debt level.
Changing Jobs Without Speaking to the Lender
A job change can affect the lender’s ability to verify your income.
Making Large Unexplained Deposits
The lender may need proof showing where the money came from.
Spending Your Closing Money
Keep your expected down payment and closing funds available until the transaction is complete.
Focusing Only on the Mortgage Payment
Also consider property taxes, insurance, HOA or condominium fees, utilities, maintenance, and repairs.
Assuming Every Lender Offers the Same Programs
Lenders have different products and rules. Comparing options can be valuable.
Common Home-Buying Myths
Myth: I Need 20% Down
Fact: Many loan programs permit qualified buyers to purchase with less than 20% down. Some eligible VA and USDA buyers may qualify without a down payment.
Myth: Assistance Is Always Free Money
Fact: Some assistance is a loan that must be repaid later.
Myth: Imperfect Credit Means I Cannot Buy
Fact: Different loan programs have different standards.
Myth: I Should Find a House Before Speaking With a Lender
Fact: Speaking with a lender first helps you understand your budget and financing options.
Frequently Asked Questions
Do I need a 20% down payment?
No. Your required down payment depends on your loan program and qualifications.
Can closing costs be included in the loan?
Some costs may be financed or offset through lender credits, seller assistance, grants, or assistance programs, depending on the loan and transaction. Ask your lender for the total cash-to-close estimate.
Can the seller pay some of my closing costs?
Possibly. Seller contributions must be negotiated and are subject to contract and loan-program limits.
Can family give me money toward my purchase?
Many loan programs allow eligible gift funds, but the lender may require a gift letter and proof of where the money came from.
Can I qualify if I am self-employed?
Possibly. Traditional and alternative loan options may be available. Expect the lender to review your income, bank statements, tax returns, assets, or other records.
Can I buy new construction using assistance?
Possibly. The property, builder, loan, and assistance program must all meet the applicable requirements.
How long does buying a home take?
The timeline varies. Many financed purchases close within approximately 30 to 45 days after contract acceptance, but the process may be shorter or longer.
Can I apply for a mortgage before finding a home?
Yes. You do not need a signed purchase contract to apply for a mortgage and receive a Loan Estimate.
Should I compare lenders?
Yes. Compare interest rates, fees, loan features, assistance options, and total monthly payment – not only the advertised rate.
Need a Lender? I Can Help
Choosing the right lender can be just as important as choosing the right home. If you do not already have a lender, I would be happy to connect you with experienced mortgage professionals who can review your situation and explain the options that may be available.
Depending on your qualifications and goals, they may discuss:
Maryland Mortgage Program loans
Down payment assistance
Grants
FHA loans
Conventional loans
VA loans
USDA loans
Bank statement loans
Employment-verification programs
Asset-based loans
DSCR investor loans
Hard money loans
Seller-financing possibilities
Other specialized financing
I do not determine loan eligibility or guarantee approval. The lender will review your financial information and explain the available programs and terms.
Contact Samuel Imoisili to request a lender introduction or schedule a buyer consultation.
Ready to Start Looking for a Home?
Once you understand your financing and receive a pre-approval, the next step is finding a property that fits your needs and budget.
Read the Complete Maryland Home-Buying Guide
Whether you are buying your first home, relocating, investing, or exploring your options, I am here to help you understand the process and make informed decisions.
Samuel Imoisili
Associate Broker, ABR®, CIPS®, REALTOR®
eXp Realty LLC
Serving Maryland and Pennsylvania
Cell: 717-379-4210
Email: sam@simoisili.com
Website: www.simoisili.com
Helpful Official Resources
Consumer Financial Protection Bureau Home-Buying Tools
Disclaimer
This article is provided for general educational purposes only. It is not legal, tax, accounting, financial, credit, investment, or mortgage advice.
Loan programs, interest rates, assistance amounts, income limits, property requirements, lending guidelines, and eligibility rules may change and may vary by lender. Not every buyer will qualify for every program.
Hard money, seller financing, contracts for deed, balloon-payment loans, and interest-only loans may involve additional costs and risks. Buyers should carefully review all written terms and consult qualified professionals before entering an agreement.
Speak with an appropriately licensed mortgage lender, settlement professional, attorney, tax advisor, financial advisor, or other qualified professional about your specific situation.
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