There was a post on here from last year about using MMP funds to help buy your first home. I had commented on that post with some info on the program, and I ended up providing the mortgage, with MMP, for the person who made the post - and I still get regular DMs about it so thought making a full post may be beneficial. I wanted to give a bit more info on MMP and how it works..
(Original Post https://www.reddit.com/r/maryland/comments/135c2p7/has_anyone_gone_through_the_first_time_buyer/ )
I’ve worked in mortgage for 25 years, all in Maryland primarily lending in Md/DC/Va. It’s an interesting time for buyers because it’s a rare time where both prices and rates are at recent historical highs. During COVID prices were booming but rates were at all time lows, making those “used to be $350k now its $500k” homes affordable to $350k buyers. Now, that same home may be $600k and costs what it would’ve costed to buy a $900k home 3 years ago. That’s what the news means when they tell us there is an affordability crisis. It means most people can’t afford the payment on the house they want. Or that the cost of the house they want is too much to spur someone to leave what they have now.
Now, tackling the payment problem is a different problem that attacking the cash to close problem. I am going to focus in this post on talking about how MMP can get your cash down to buy a home. I can do another post or talk more in depth . I also do a lot of non MMP mortgage financing as well, and am happy to talk about any questions on that.. but right now a lot of first time buyers are asking about MMP so mainly going to focus on that. Also, the numbers below are just rough numbers, not to the penny – every house and situation is different so these are just to give a general idea.
When you buy a home, you need to make a down payment. Only exceptions to that are VA (veterans) and USDA (rural housing) are both truly 0$ down. Other than that you’re lowest down payments are conventional 1st time buyer 3% down, and FHA 3.5% down. On top of that you will have closing costs to buy a home. Let’s say those are also 3.5-4%.
So you buy a $400k home, you will need about 7% ‘all in’ to buy that home. That’s $30k.. Let’s start with MMP for this example. You need $30k, MMP will give you 5% (of the loan amount, which is 97% of the price, so about 4.9% of the price). This comes out to about $19k. This leaves you needing only $11k right there.
For some folks this is enough, they can do $11k and call it a day. For other folks that’s still not low enough. In that case what you will want to do is rely on seller paid closing costs. Back during COVID seller paid closing costs were non-existent. This is because for the most part once a home was listed for sale there were multiple offers coming in on the house. If you’re one of 10 offers, you need to make your offer strong to win, and the very first thing that will strengthen an offer is not asking the seller for anything. However, in 2022 as sales slowed, we started seeing sellers being willing to give some closing cost help. In 2023 and so far in 2024 there seem to be homes that get listed and get a bunch of offers and then some that don’t, so there is some possibility for some seller help but it will depend on the home and how long it’s been listed.
Anyways, if you have $8k to spend, and you need $11k, you’re going to need to get the seller to pay $3k.. how to best approach that Id confer with your Realtor, but that is how you can dial in the cash needed to be where you want it to be. If you truly don’t have any money to put into the transaction you can ask for $11k (in this example) but it’s a big ask and they may just say no… but that is how you get the cash down if MMP doesn’t bring it down enough. If you have family willing to gift you money, you can also use that.
MMP has a few qualifying factors… they have an income cap. It varies by county, but for the most part for DC County’s in Md (PG, MoCo, Chuck, Calvert) that income limit is $180k/yr for a 1-2 person household, and $210k/yr for 3+. In Baltimore area county’s in Md (AACo, Howard, Baltimore, etc..) the income limit is $124,500 for 1-2 person, and $143k for 3+. Of note, this is household income – for anyone living there over 18 years old. So, if you and your spouse are buying and loan is in just your name, they’re still counting spouses income for the max income calculation.
Also of note, Southern and Western Maryland have their own income limits, so if you’re not in one of the above county’s check this for the exact income limit for the county you’re buying in: https://mmp.maryland.gov/Lenders/Documents/income-and-purchase-limits.pdf
The other big qualifying factor is your credit score. If you’re over 660 you’re fine. If you’re between 640-660 you’re likely fine, but we do need to make sure we have 1-2 compensating factors.
To get the benefit of the full 5% (in some cases they will go to 6% help, but it’s a tighter income restriction and not going to focus on 6% in this post) you need to be a 1st time buyer. If you’re not a first time buyer, you can still use the program but are capped at 3% help from MMP.
There are other ways to get money towards the down payment. For this post I am focus on MMP because in general (not always but in general)their 5% program gives you the most. And when you want down payment assistance, you generally want who is going to give you the most down payment assistance. I wanted to do a post on this because I’ve gotten a good amount of messages and questions and so I thought making a post may be helpful to some. Feel free to reach out with any questions..