What Does It Cost to Buy a Home in Montgomery County, MD as a First-Time Buyer?

Short answer: As a first-time buyer in Montgomery County, you'll need money for a down payment, closing costs and a few upfront fees. The good news is that Maryland has programs built to help with exactly those costs, and a Maryland first-time buyer gets a break on state transfer tax. Your lender's Loan Estimate gives your real numbers, so start there.

What you pay upfront

• Down payment. Conventional loans can go as low as 3% down, and FHA loans as low as 3.5% down Check current limits with your lender. Putting less down usually means mortgage insurance.
• Closing costs. These include lender fees, title insurance, settlement fees, prepaid items like homeowners insurance and property tax escrow, and Maryland transfer and recordation taxes.
• Earnest money and inspection. Earnest money is a deposit that goes toward your purchase at closing. Inspections are paid separately and are your choice.

Help with the down payment

The Maryland Mortgage Program offers first-time buyer loans with down payment assistance. Options listed by the program include assistance equal to 3%, 4% or 5% of your first mortgage, or a $6,000 option. Maryland SmartBuy is a separate product for buyers with eligible student debt. Montgomery County also has its own programs, including the Montgomery Homeownership Program, which are funded in limited amounts and have income limits.

A few things to know, based on the program's own materials:

• The state defines a first-time buyer as someone who hasn't owned a home anywhere in the last three years, with some exceptions, including certain veterans.
• Income and purchase price limits apply, and they differ by county and household size.
• A homebuyer education course is required.
• Funds can run out, so ask your lender about current availability before you write an offer.

Maryland transfer and recordation taxes

Maryland charges a state transfer tax, a county transfer tax and a recordation tax at closing. A buyer who qualifies as a Maryland first-time homebuyer gets a break on the state transfer tax, and the contract decides who pays the county transfer and recordation taxes. Rates in Montgomery County vary by price, so ask your title company for the exact figure on your price.

The process, step by step

1. Get pre-approved and ask which assistance programs fit your income.
2. Take the homebuyer education course if you're using a state program.
3. Tour homes and have the numbers checked on each one. I run a property analysis before each showing for my buyers.
4. Make an offer, then schedule inspections.
5. Complete the appraisal and final loan approval.
6. Close, get your keys.

Common questions

How much do I need to buy a home in Montgomery County?

It depends on the price, loan type and any assistance. Ask your lender for a Loan Estimate on a specific price so you can see down payment, closing costs and monthly payment together.

Can I use down payment assistance in Montgomery County?

Often, yes, if you meet the income, price and first-time buyer rules. State and county programs both exist, and funds are limited.

Do first-time buyers pay transfer tax in Maryland?

Qualifying first-time Maryland buyers get a reduced state transfer tax. County transfer and recordation taxes depend on your contract and county rules, so confirm with your title company.

What if I have student loans?

Maryland SmartBuy is designed for first-time buyers with eligible student debt. Ask a lender whether you qualify.

How do I start?

Talk to a lender first, then a buyer's agent. If you'd like to walk through your numbers, you can book a 15-minute call with me. No pressure.

Sources: Maryland Mortgage Program (mmp.maryland.gov). Program terms, rates and funding change often. This is general information, not loan or tax advice. Michael Wade, REALTOR®, Samson Properties.