The Maryland Department of Housing and Community Development announced a loan program yesterday that will make it easier for low- and moderate-income homebuyers to afford a down payment and settlement costs.
The Downpayment and Settlement Expense Loan Program will allow eligible buyers to apply for a no-interest loan of up to $5,000, with repayment deferred until either the first mortgage is paid off or the home is sold.
Settlement Expense Loan Programs, known as SELP, are funded through the issuance of state bonds and have been used by the city and counties to help individuals who lack the money to cover closing costs.
"One of the biggest hurdles to homeownership is saving enough money for the down payment and settlement expenses," said Housing Secretary Raymond A. Skinner. "This program will make it easier for borrowers in the Maryland Mortgage Program to clear that hurdle."
According to Fran Makle, director of the housing department's homeownership program, the program will start out with a pool of $652,000, "allowing us to serve about 130 families."
"Most young couples have not saved enough," Makle said. "Sometimes you look at what they are paying in rent, and it's more than a mortgage payment. They just don't have enough money for a down payment."
The department also announced changes to the Maryland Mortgage Program, which offers below-market mortgages to eligible borrowers. The state is lowering the rate for the 30-year, fixed-rate loans from 7.5 percent to 6.9 percent and raising income as well as purchase limits. It is also expanding the program to include new construction. However, the department is limiting the loans to Priority Funding Areas, which are extensions of Gov. Parris N. Glendening's Smart Growth initiative that supports existing neighborhoods.
Previously, MMP loans were available statewide. Now they will be limited to the state's incorporated cities and towns, the areas inside the Baltimore and Washington beltways and areas designated by county governments in conjunction with the state Office of Planning. The purchase limits for eligible buyers in the Baltimore metropolitan area are $140,634 for existing homes and $157,825 for new construction. Income limits are $66,900 for a one- or two-person household and $76,935 for households of three or more.