Maryland SmartBuy 2022 | Student Debt Forgiveness Program

Thanks to the new Maryland SmartBuy 3.0 program, those repaying their student loans have a new way to cut back on their costs—while also purchasing a home! The Maryland SmartBuy helps homebuyers by offering an innovative plan that trades student debt forgiveness in exchange for buying a home or property within the state. This forgiveness option replaced the original Maryland SmartBuy initiative. With this new incentive program, it is only natural to have questions. You may wonder whether you qualify, what you need to prepare, and whether it fits your current goals. Don’t worry – we’ve got you!

Below, you will find all the information you need to determine if you qualify for this new and exciting program, the eligibility requirements, and how to take advantage of this program to help keep more money in your pocket. So, keep reading to learn more about Maryland Smartbuy and if it’s the right program for you!

An Overview of Smartbuy 3.0

What makes the Maryland Smartbuy 3.0 program groundbreaking is its focus on borrowers with full student debt. Believe it or not, student loan debt is one of the biggest obstacles for today’s potential home buyers. By offering student debt relief in exchange for purchasing a new home, this program has made homeownership even more possible for Maryland residents.

Student Loan Statistics

If you are a Maryland resident with student loans looking to purchase a home, this may be the perfect solution! Existing student debt plays a significant role in how—or even if—those with student loans can take out a mortgage.

According to the latest statistics, over 45 million Americans have student debt. Today’s high school graduates expect to borrow nearly $40,000 in student loans for their bachelor’s degrees – while current borrowers owe, on average, between $28,950 and $71,000, depending on their degree level. Of course, these averages increase for anyone who attended a specialized school, such as lawyers, doctors, and dentists.

If you financed your higher education career with student debt, then you know how difficult it can be to make monthly payments. But, at the very least, borrowers have had a chance to see what life without crushing loans can be like, thanks to the student loan freeze experienced during the pandemic. With the SmartBuy 3.0 program, you could save money on your monthly payments, get out of debt sooner, and purchase your first home!

The Answer for Maryland Home Buyers

The Maryland Smartbuy program is an innovative yet specific initiative aimed at helping those with student debt purchase a house. For many potential first-time home buyers, their student debt makes it difficult, if not nearly impossible, to include a mortgage payment on top of their current monthly student debt repayment.

Instead of trying to figure out how to add a new mortgage payment to your existing student loan repayment, this initiative gives student loan forgiveness to those looking to purchase a home or property in the state of Maryland. Potential buyers should do their homework when determining if any programs or unique mortgage agreements could make their mortgage more affordable—the same due diligence applies to the Smartbuy 3.0 program.

Maryland SmartBuy involves positively paying off student debt. Understanding the eligibility requirements and how this program works is essential if you are considering this program. Keep reading to learn more!

Who Should Use It

As mentioned above, this opportunity isn’t the right fit for everyone – borrowers must purchase an eligible home and meet applicable requirements. However, the Maryland SmartBuy program is perfect for paying off student debt. This innovative option helps homebuyers with student debt who have student debt and want to purchase a property within the state.

It is open to any homebuyers meeting the eligibility requirements, which you can find in the next section. If you are eligible, this opportunity can help you save money on your monthly payments and bring your outstanding debt balance to zero. Of course, many incentives and assistance options exist for buying a home. For this reason, it is crucial to consider all of your options by determining the factors and how they affect your financial situation.

Pro Tip

Uncertain if SmartBuy is right for you? Fill out our personalized form to help determine your options!

Program Requirements

Every loan has a set of requirements that potential homebuyers must satisfy to enjoy the program’s benefits. Luckily, many different mortgage programs are available, but it is up to you to find the one best suited to your needs and situation. Keep reading to determine whether the Maryland SmartBuy 3.0 program is the right fit for you.

Student Loan Debt – is SmartBuy 3.0 Right for You?

Before you can consider applying, you need to make sure you meet the requirements set by the state government. Therefore, it is crucial to read these requirements carefully to ensure you are eligible.

To apply for SmartBuy, you need to meet the following requirements:

• Cannot currently own any real property
• Cannot have a co-signer on the mortgage application
• Must have a middle credit score of at least 720
• Must have at least a $1,000 minimum balance in total student debt
• Amount forgiven must fully pay off student debt
• The borrower’s entire student loan balance must be paid off as part of closing and will be reflected on the Closing Disclosure (CD)
• Documentation must state that the borrower(s) have no student debt remaining
• While student loans may be in repayment or deferred status, the borrower also must be current on their repayment

Eligible Properties – Does Your Dream Home Fit the Program?

While most properties in Maryland are eligible for the SmartBuy 3.0 program, a few still need to meet the requirements. Therefore, it is essential to understand which properties are unsuitable for ensuring that you choose a new home that allows you to enjoy the benefits of the initiative.

• Maryland SmartBuy 3.0 covers nearly all properties in the state of Maryland
• Real Estate Owned (REO) properties from the Maryland Department of Housing and Community Development (DHCD) are not eligible to be financed through the program
• If the property is in a targeted area, first-time homebuyer requirements do not apply

As long as the other properties you are considering do not fall into one of the ineligible categories (such as state-owned property), you can utilize the benefits of the SmartBuy program. However, you should discuss this with a real estate professional if you are unsure.

Institutional Eligibility – Is Student Debt Relief Offered?

While one in seven Americans have student loan debt, the truth is that not all student loans are equal (or come from the same place). Unfortunately, SmartBuy 3.0 does not consider all types of debt eligible for forgiveness exchange.

The good news is that SmartBuy is incredibly inclusive and applies to most types of schools. All public, non-profit, and for-profit universities, colleges, vocational schools, and postsecondary educational institutions meet program eligibility. The SmartBuy 3.0 program covers more than those who attended a traditional four-year university.

However, the institution must be accredited and eligible to participate in student aid repayment plans administered by the U.S. Department of Education. If you are still determining whether you attended an accredited educational organization, view the government’s official list of accredited institutions.

Most importantly, the institution’s loan servicer must provide a monthly verification statement from the student debt collector showing the amount borrowed (qualifying student debt purchase). Unfortunately, this only applies to federal loans, which means personal loans from private lenders are not accepted.

Class Requirements

Becoming a new homeowner is challenging, and you can expect many new things you never had to deal with before. For this reason, Maryland SmartBuy 3.0 requires you to enroll in a Homebuyer Education class and receive a homeownership counseling certificate. Not only do these courses prepare you for purchasing your first home, but you will also have a much deeper understanding of the process and paperwork involved. NIS or HUD must approve the Homebuyer Education class you enroll in. Other Requirements

Of course, you must remember the usual checks required to purchase a home. So, in addition to proving you’re eligible for the initiative according to the standards above, you’ll also have to provide further information to paint a detailed picture of your current financial status.

Most of the requirements relate to the underwriting process; during this part of your homebuying journey, you can expect to provide information related to your:

• Credit score and social security number
• Total debt-to-income ratio
• Proof of income and bank statements
• Purchase price limitations
• Asset limitations

How It Works

If you’ve made it this far, you’ve read through the requirements and think you may be eligible for SmartBuy 3.0. That’s great! The next step is learning more about how it works and how you can get started.

Pro Tip

Interested in learning how much student debt your dream house can pay off? Try using our SmartBuy calculator!

Maryland Mortgage Program Guidelines

The borrower can finance up to 95% of the sales price with a first mortgage using a 30-year conventional amortizing mortgage with a fixed interest rate. The first mortgage will group with other mortgages into a Fannie Mae or Freddie Mac Mortgage-Backed Security (MBS) structure.

The debt’s forgiveness presents as a second loan organized as a five-year, forgivable Promissory Note of up to 15% of the home’s purchase price, not to exceed $50,000 (in other words, the maximum payoff is up to 15% of the home purchase price; the maximum yield remains $50k for properties priced at or above approximately $333,333). At the time of purchase, the loan will use to pay off a borrower’s outstanding student debt balance.

There are two crucial factors to remember while learning about this type of loan. First and foremost, partial pay is not an option under this initiative – which means you must entirely pay off your debt through the program. If you have two buyers on the loan, only one borrower’s loan balance must be paid in full. To be eligible for this loan, the student debt obligation must be in your name and for your education.

This second loan, not to be confused with the mortgage, has no monthly repayment and a zero percent interest rate that matures after five years. On the home purchase settlement date, the amount forgives 20% per year. If the property sells before year five, the remainder of the loan will be due on sale. So, if you resell your home before the five years, you are responsible for paying off the remaining balance.

Assistance Opportunities

Several assistance options are designed to make SmartBuy 3.0 even more affordable! Backed by the special Maryland Mortgage Program, various assistance plans are available to help first time homebuyers.

Maryland SmartBuy financing plans provide closing cost and Down Payment Assistance (DPA) through grants and loans, offering more ways to borrow money. The points below describe each option, all of which are to be considered additional second mortgages, deferred entirely until the property’s sale:

• $6,000
•  4% of the loan amount
•  6% of the loan amount, exclusively for borrowers earning 50% or less of Area Median Income (AMI)

This second lien must be paid off with the buyer’s own money if the first lien is refinanced outside the Maryland Mortgage Program. Otherwise, it may be subordinated to Community Development approval—all underwriting overlays apply. If any other loan is taken out (greater than or equal to two loans), the buyer must follow program guidelines while paying off the particular loan.

Purchase Limitations

An essential requirement of the SmartBuy 3.0 program is that you do not own any other real property. Additionally, you must be a first-time homebuyer; circumstances that waive this requirement include the following:

• Homes eligible in a targeted area, such as Baltimore City
• You have not owned a primary residence for more than three (3) years
• You are a veteran who has been honorably discharged and has not used the previous first-time homebuyer exemption

Did You Know?

You can download a brochure with complete program information on our Maryland SmartBuy Fact Sheet page!

Loan Information

Private Mortgage Insurers (PMIs)

You can find a list of private mortgage insurers for Maryland SmartBuy 3.0 loans on the Maryland Mortgage Program website. It is crucial to contact and check with the PMI of their choice in advance. Freddie Mac loans should be HFA Advantage, and FNMA loans should be HFA Preferred.

Combined Loan to Value (CLTV)

The combined loan-to-value ratio (sometimes referred to as the CLTV) compares the value of a property with the total secured loans held against it. Mortgage lenders use this ratio to determine the risk of default (when a borrower can no longer pay) for a potential homebuyer when they use more than one loan. The maximum CLTV for SmaryBuy is 105% based on the home purchase price. The second unsecured loan is calculated separately.

Additional Considerations

This program does not include Partner Match. Assistance from non-profits, contractors, developers, and employers may be used with SmartBuy 3.0 so long as the CLTV is below applicable limits. MMP/CDA does not provide match funds for any of these alternatives. Both automated Underwriting Systems (AUS) and manual underwriting are allowed. The master servicer is U.S. Bank. Funding limitations will be published if anticipated.

Where To Start

Now that you have a basic understanding of the Maryland SmartBuy program and its finer details, here is what you need to know about starting the process yourself! Contact us to receive a list of approved SmartBuy mortgage lenders (our list of loan officer recommendations meets Maryland Mortgage Program requirements).

What’s The Catch?

Maryland SmartBuy is a state-funded initiative designed to help make homeownership more attainable for Marylanders. The only “catch” you should be aware of is that the loan forgiveness occurs over five years, and if you sell your home before the conclusion of those five years, you will be responsible for paying off the remainder of the student loan debt.

That number is determined by splitting the total amount of the debt over 5 years. So, if you sell your home at the end of year three, you will be responsible for paying the total for the remaining two years at closing. Not a wrong “catch,” if you can call it that!

Buyer Considerations

There are many reasons to own a home in Maryland. Homeownership is one of the cornerstones of the American dream. It allows people to build equity, provides stability and security, and can be a good investment. Owning a home also comes with responsibilities, like maintenance and repairs, but the benefits of a home purchase generally outweigh these. If you’re considering move-in-ready homes, SmartBuy is an excellent option.

Of course, there are also reasons why you may want to avoid buying a home. It’s a big financial responsibility and only suitable for those who can afford the down payment (unless utilizing a DPA program) and keep up with the monthly cost structure. If you need to figure out whether homeownership is right for you, it’s essential to do your research and talk to our in-house Realtor before making any decisions on this limited-time program.

Maryland SmartBuy Program Summary

SmartBuy is an excellent opportunity for eligible homebuyers to achieve homeownership goals and student debt relief. If you are interested in taking advantage of this initiative, contact us today to help you get the ball rolling—we look forward to hearing from you!