1st Time Advantage 5% Loan Maryland | Zero Interest DPA
Buying your first home in Maryland just got more affordable. The Maryland Mortgage Program's 1st Time Advantage 5% Loan is specifically designed to help first-time buyers overcome the biggest obstacle to homeownership: the down payment.
If you're earning a steady income but struggling to save up tens of thousands of dollars while paying rent, this program could be exactly what you need to buy a home sooner rather than later.
What Is the 1st Time Advantage 5% Loan?
The 1st Time Advantage 5% Loan is a Maryland state program that provides down payment assistance equal to 5% of your total first mortgage amount. This assistance comes as a second mortgage with a 0% interest rate, and you don't make monthly payments on it.
Let's break down what that actually means with a real example.
Here's how it works:
Say you're buying a $300,000 home with an FHA loan requiring 3.5% down. That's $10,500 you need for the down payment. But you also have closing costs—typically another $6,000 to $9,000.
With the 1st Time Advantage 5% Loan, you receive 5% of your mortgage amount (roughly $14,250 in this example) as down payment assistance. This assistance can cover your entire down payment and a significant portion of your closing costs.
The result? Some Maryland buyers have closed on homes with less than $2,000 out of pocket using this program combined with their own savings.
The Best Part: No Monthly Payments on the Assistance
Here's what makes this program different from traditional down payment assitance loans:
The 5% assistance comes as a second mortgage that sits behind your primary mortgage. It carries a 0% interest rate, which means the amount never grows—what you receive is exactly what you'll owe when it's time to repay.
Even better, you don't make any monthly payments on it. The assistance loan is deferred for the life of your primary mortgage, which means it sits quietly in second position without requiring monthly payments.
This structure allows you to focus on building equity in your home through your regular mortgage payments and market appreciation, without the burden of an additional monthly payment.
Who Qualifies for This Program?
The 1st Time Advantage 5% Loan has specific eligibility requirements, but they're more flexible than you might think.
First-Time Homebuyer Status
You must be a first-time homebuyer, which Maryland defines as someone who hasn't owned a home anywhere in the past three years. There are two important exceptions:
Veterans can use their one-time exemption (you'll need to provide your DD-214)
Anyone buying in a designated targeted area is exempt from the first-time buyer requirement
Credit Score Requirements
You'll need a minimum credit score of 640 to qualify for the Maryland Mortgage Program. This is higher than the FHA minimum of 580, but it's still very achievable for most responsible borrowers.
If your score is currently in the 600-620 range, it's worth spending a few months working on it before applying. Sometimes that's just a matter of paying down a credit card balance or disputing an error on your credit report.
Income Limits
Maryland sets income limits that vary by county and household size. Generally speaking:
Single person households can earn up to around $116,850
Two or more person households can earn up to around $133,900
Some counties have different limits, so check the current income limit chart on the Maryland Mortgage Program website for your specific area.
Asset Restrictions
Your liquid assets (savings, checking accounts, investments) cannot exceed 20% of the purchase price. Retirement accounts like 401(k)s don't count toward this limit.
This might sound restrictive, but remember—the program is designed for buyers who need assistance with down payment and closing costs. If you already have substantial savings, you might not need this level of help.
Property Requirements
The home must be your primary residence—no investment properties or vacation homes. It needs to be located in Maryland, and new construction must be in a Priority Funding Area.
The property can be a single-family home, townhouse, or approved condo. Maximum lot size is 4 acres without special exception.
How the 5% Loan Compares to Other MMP Options
The Maryland Mortgage Program offers several assistance levels, each with different interest rates and benefits. Understanding your options helps you make the best choice.
1st Time Advantage Direct: No down payment assistance, but you get the lowest interest rate available in the program.
1st Time Advantage 6000: Provides exactly $6,000 in assistance and can be combined with Partner Match programs for up to $10,500 total assistance.
1st Time Advantage 3% Loan: Provides assistance equal to 3% of your first mortgage amount.
1st Time Advantage 4% Loan: Provides assistance equal to 4% of your first mortgage amount.
1st Time Advantage 5% Loan: Provides assistance equal to 5% of your first mortgage amount—the highest level of assistance available in the first-time buyer track.
The general rule: more assistance means a slightly higher interest rate on your primary mortgage. The 5% loan will have a higher rate than the 3% loan, which has a higher rate than the Direct option.
But here's the key question: Would you rather wait 3-5 more years to save up the full down payment and closing costs yourself, or buy now with a slightly higher interest rate?
For most first-time buyers, especially in Maryland's appreciating housing market, buying sooner makes more financial sense than waiting.
What Happens If You Sell or Refinance?
The 5% assistance loan is deferred, meaning you don't make monthly payments on it. However, it must be repaid in full when you sell the home, refinance your primary mortgage, or pay off your loan completely.
Here's what that means in practice:
The assistance sits as a second mortgage behind your primary mortgage. It carries 0% interest, so the amount never grows—if you received $15,000 in assistance, you'll owe $15,000 when it's time to repay.
When you sell: The assistance loan is paid off from your sale proceeds before you receive any equity. For example, if you sell your home for $350,000 and owe $280,000 on your primary mortgage plus $15,000 on your assistance loan, you'd walk away with $55,000 (minus closing costs).
In most cases, if you've owned the home for several years, appreciation and principal paydown will have built enough equity to cover the assistance repayment and still leave you with proceeds for your next home purchase.
When you refinance: If you want to refinance to get a lower interest rate, you'll need to repay the assistance loan unless you refinance into another Maryland Mortgage Program loan that allows the assistance to be subordinated (moved behind the new first mortgage).
The MMP does offer a 97% LTV Conventional Refinance Program that can allow subordination of existing MMP DPA loans. Your lender can explain whether subordination is an option for your situation.
When you pay off your mortgage: If you make extra payments and pay off your 30-year mortgage early, the assistance loan becomes due at that time.
The key point: this is a real loan that must be repaid. It's not a grant. However, because it carries 0% interest and requires no monthly payment, it gives you time to build equity in your home through appreciation and regular mortgage payments before repayment is due.
