5 First-Time Buyer Myths That Cost Maryland Families Thousands

Misinformation is the single biggest tax on first-time buyers in Maryland. The myths below are repeated so often — by friends, family, and even some real estate agents — that they get treated as facts. Here are the five I hear most, and what the actual program rules say.

Myth 1: You need 20% down. This is the most expensive myth on the list. MMP can close with as little as $1,000 of the buyer's own funds in many scenarios, and the down payment requirement on the underlying FHA or conventional loan can be as low as 3% to 3.5%. Combined with MMP assistance, your out-of-pocket cost at closing is often under $3,000 — sometimes nothing at all if you negotiate seller credits. The 20% number comes from a different era when conventional lending dominated; it has not been the standard for first-time buyers in over a decade.

Myth 2: Your credit needs to be 740+. MMP's minimum is 640 for most products, and there are pathways down to 620 for specific loan types. A 680 score qualifies for essentially every MMP product. Higher scores get better rates, of course, but the threshold for being approved at all is much lower than buyers assume. If you've been waiting to apply until your score 'gets there,' you may already be there.

Myth 3: You can only use DPA once in your life. Most MMP DPA products are tied to first-time buyer status, but Maryland defines a first-time buyer generously: anyone who hasn't owned a primary residence in the last three years qualifies. So if you sold a home four years ago and have been renting, you're a first-time buyer again for MMP purposes. Some MMP products also allow repeat use in designated 'targeted areas' regardless of prior ownership.

Myth 4: DPA is a grant you have to pay taxes on. This is half-wrong and worth understanding. Most MMP DPA is structured as a deferred second mortgage, not a grant — meaning you don't pay taxes on it because it's a loan, not income. The loan is forgiven over time or repaid at sale or refinance, depending on the product. Even where forgiveness occurs, the tax treatment is usually favorable. A handful of county programs do issue true grants, and even then the tax exposure is typically zero because of how DPA grants are characterized under the IRS code.

Myth 5: Working with a DPA-focused lender costs more. The opposite is usually true. The assistance more than offsets any rate difference, and DPA-focused lenders often have negotiated lender credits that reduce closing costs further. The lenders who 'don't bother with DPA' aren't doing you a favor — they're just unwilling to do the paperwork, and you're paying for that unwillingness in the form of a larger down payment.

If any of these five myths has been holding you back, the cost of a second opinion is zero. The cost of believing the myth is usually five figures.