What Qualifies Me as a First-Time Home Buyer in Maryland?

In Maryland, "first-time home buyer" doesn't mean one single thing. The Maryland Mortgage Program says you're a first-time buyer if you haven't owned a home you lived in as your primary residence at any time in the past 3 years. The transfer tax break uses a different definition. So you can qualify for one and not the other.

That surprises a lot of people. Some buyers assume they're out because they owned a home years ago. Others assume they're in and find out at the lender's desk that they're not. Here's how it breaks down.

The Maryland Mortgage Program definition

The state's Maryland Mortgage Program (MMP) says a first-time homebuyer is someone who has not owned a home they primarily lived in during the past 3 years. It also says this definition is not the same one used for recording tax purposes.

There are a few exceptions that can let you use first-time buyer products anyway:

• You're buying in a targeted area, as defined by the program.
• You're a veteran using your one-time exemption. Your lender will ask for a copy of your DD-214 or a current statement of service.

Even when the first-time rule is waived, MMP says you can't own other real property at the time of closing. The home also has to be your primary residence, not an investment or second home.

Some MMP products, like First-Time Advantage, require first-time status. Other MMP "Flex" products are open to repeat buyers. Your lender can tell you which one fits.

The transfer tax definition is different

Separate from the loan programs, Maryland gives qualifying first-time buyers a break on closing taxes. Based on what I've read from title and lending sources, the state transfer tax drops to 0.25% and the seller pays it. By default, the seller also pays the county transfer tax and recordation tax for these buyers, unless the contract says otherwise.

The test here is generally whether you've ever owned a home in Maryland that was your principal residence, and whether you'll live in this one. That's stricter than the 3-year lookback, because it isn't a lookback at all.

Because the rules differ, ask your title company to confirm your status before you write an offer. Contracts can also shift these costs, and in a competitive situation some do.

Real-life examples

• You owned a home 5 years ago and rented since. You may count as a first-time buyer for MMP loan products, but possibly not for the transfer tax break if that home was in Maryland.
• You've never owned. You're likely in on both counts.
• You own a home now and want to buy another. You can't use MMP first-time products. Move-up buyers on MMP programs generally have to sell the current home before they buy the new one, according to the program's homebuyer education guidance.
• You're a veteran who has owned before. The veteran exemption may let you use first-time buyer products once.

What else you may need

Many programs have more requirements than first-time status. Income limits, purchase price limits, credit score minimums, and a homebuyer education class are common. Some county programs add their own rules, like employment requirements. These change, so check the current program sheet before you count on any benefit.

What I'd do first

1. Talk to a lender before you shop. They can tell you which programs you actually qualify for.
2. Ask them to confirm how your history fits each definition, in writing if possible.
3. Ask your title company about the transfer tax treatment.
4. Build the answers into your budget and your offer.

I have a lender partner I'm happy to introduce, but you're always free to choose your own. You can also see my buyer resources for more on getting started.

FAQ

Do I have to be a first-time buyer to use Maryland Mortgage Program loans?

Not always. Some products require it and some, called Flex products, are open to repeat buyers. Your lender can tell you which applies.

If I sold my home 2 years ago, am I a first-time buyer?

Under the MMP 3-year rule, probably not, unless you're buying in a targeted area or qualify for the veteran exemption. Confirm with a lender.

Does a rental property count as a home I owned?

The MMP rule talks about a home you primarily lived in. Ownership of other property can still matter, since you can't own other real property at closing. Ask your lender about your situation.

Do I need to take a class?

Many programs require homebuyer education. Your lender or the program will tell you.

Who pays the transfer tax for a first-time buyer?

By default, based on what I've seen, the seller pays. The contract can change that.

Next step

Not sure where you land? Grab a free 15-minute call at calendly.com/michaelwaderealtor/15min and we'll go through your situation. No pressure. You can also reach me through my contact page.

Sources: Maryland Mortgage Program loan eligibility and MMP quick reference sheet.