Maryland SmartBuy 3.0: Buy a Home, Get Rid of Student Loan Debt

 August 31, 2021
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At 26 years old and with $30,000 in student loan debt, Jasmine Townsel thought homeownership was out of reach — until she heard about the Maryland SmartBuy program.

In September 2016, Townsel became the first person to benefit from Maryland SmartBuy, buying a townhome and eliminating her student loan balance in one fell swoop.

Maryland SmartBuy is still going strong. If you’re a creditworthy borrower planning to make the state your home for at least five years, Maryland SmartBuy 3.0 could help you buy a home with only a 5% down payment while eliminating up to $30,000 in education loans.

What is the Maryland SmartBuy program?

The Maryland SmartBuy program allows state residents to buy a home while simultaneously wiping out their student loan debt (up to $30,000). You would have a 5% down payment prepared for the home, and the state government would fork over as much as 15% of the home’s purchase price to pay off your outstanding education loans.

As for your new mortgage, Maryland SmartBuy-approved lenders quote eligible borrowers 30-year home loans with a fixed interest rate.

If that sounds too good to be true, keep in mind that there’s some fine print: Under the Maryland SmartBuy 3.0 program rules, the home you buy must be a state-owned property. So, you can’t apply Maryland SmartBuy benefits to that dream home you found on Zillow or Redfin.

Additionally, you must have a credit score of 720 and not have owned a home for at least the previous three years, among other eligibility criteria (See below ). You must also plan to occupy the home as your primary residence for five years to receive the full student loan repayment benefit.

When did the Maryland SmartBuy program start?

In November 2016, the state of Maryland announced a revolutionary new program to help homeowners with student loan debt. The Maryland SmartBuy program was created to empower young graduates to become homeowners while simultaneously helping them better manage their loans.

The Maryland SmartBuy program started with $10 million in funding and has since received additional state funds, evolving into 2.0 and 3.0 iterations of the original initiative.

At an event announcing the innovative program in 2016, Maryland Lt. Gov. Boyd Rutherford spoke about how necessary it is for the state’s homeownership market.

“Traditionally, people in their 20s and 30s would account for a substantial share of Maryland’s first-time homebuyers, but we’ve seen a little difference in that demographic over the years, and it’s believed that student loan debt is a part of the challenge,” Rutherford said at the time.

How does Maryland SmartBuy work?

When you apply for a mortgage (or many forms of credit), your debt-to-income (DTI) ratio is put under the microscope. DTI helps lenders gauge whether you have the income to afford your debt payments. And because Maryland SmartBuy pays off your student loan debt, your new and improved DTI helps you gain approval for a mortgage, and in some cases, to qualify for a higher loan amount.

Under the Maryland SmartBuy program, if a buyer has 5% as a down payment on a home, the state will contribute up to 15% of the final purchase price of the house toward the buyer’s student loan balance. The government would contribute a maximum of $30,000 toward the student loan payoff, and the homebuyer must pay the remaining student loan balance in full by the house’s closing date.

The math of Maryland SmartBuy
For example, let’s say you had $30,000 in student loans and wanted to buy a $200,000 home. You would provide $10,000 — or 5% — for the down payment. The state would provide $30,000 — or 15% — towards your student loan balance, paying off your loans while you purchase your home.

When you buy a home as part of the Maryland SmartBuy program, you’re actually taking out two loans:

  1. Mortgage loan for 95% of the home (after accounting for your 5% down payment)
  2. Unsecured loan for 15% of the home, which is forgiven, interest-free over five years

That means you would need to stay in the home for at least five years to have that second, forgivable loan paid off. After five years, you’d simply have 25 remaining years of your first mortgage to pay off.

Who is eligible for Maryland SmartBuy?

To be eligible for the Maryland SmartBuy program, you need to have at least $1,000 in student loans, and your balance cannot exceed 15% of the home’s sale price.

You must clear the full balance of your debt by the day you close on your house. Once the purchase goes through, you should ask your lender to send you a letter stating that the student loan balance is now zero.

When too much debt makes you ineligible for Maryland SmartBuy

You may have more student loan debt than your state government is willing to forgive. After all, the average Maryland balance in 2021 was $39,505, according to our Maryland student loan forgiveness guide and statistics.

Say you have $45,000 in outstanding loans and are eyeing a $250,000 home. You might have saved up a $12,500 down payment, but the government’s maximum $30,000 contribution to your student loans wouldn’t zero your education debt. To be eligible for Maryland SmartBuy, you’d have to pay your debt down to that figure — $30,000, or be prepared to do so by the close of escrow on your home.

Besides making the math work, other eligibility criteria include:

  • Be 18 and have a Social Security number (U.S. citizenship is not required)
  • Meet county-specific household income limits (ranging between $92,500 up to $154,420)
  • Minimum middle credit score of 720 (two of your three credit bureau scores need to be at least 720)
  • Maximum debt-to-income ratio of 45%
  • Work with a loan officer whose company is on the list of
  • Take an approved homebuyer education class

Additionally, you must be the primary borrower (not cosigner) of your outstanding student loans, though you could refinance parent loans into your name. And the loans must be in good standing (not delinquent) and were used to attend a postsecondary school accredited by the Department of Education.

While the Maryland SmartBuy program is mostly limited to first-time homebuyers, the state can waive that restriction under specific circumstances:

  • If you haven’t owned a home for the last three years
  • If you’re an honorably discharged veteran
  • If you’re purchasing a home in a targeted area
Targeted areas Not targeted
Baltimore City or the counties of Allegany, Caroline, Dorchester, Garrett, Kent and Somerset County Counties of Calvert, Carroll, Cecil, Charles, Howard, Queen Anne’s, St. Mary’s, Talbot or Worcester

How do you apply for Maryland SmartBuy?

If you believe you meet the Maryland SmartBuy eligibility requirements, you can input your information on the You’ll be asked:

  • Personal information such as your name, email address and phone number
  • Where you’re planning to buy a home
  • When you’re available to take phone calls from Maryland SmartBuy-approved lenders

From there, you’ll connect with loan officers who can confirm your eligibility for Maryland SmartBuy and, hopefully, quote you rates and terms for your potential mortgage.

If you find that you’re ineligible for Maryland SmartBuy, you could look into other low-down payment programs.

What’s the interest rate for Maryland SmartBuy?

Mortgage rates are always on the move but were consistently at historic lows during the coronavirus pandemic in 2020 and 2021.

As of August 16, 2021, Maryland’s Department of Housing listed a 3.75% as the available fixed rate for Maryland SmartBuy borrowers taking on conventional mortgage loans guaranteed by Fannie Mae.

To track rate updates, you can sign up for the state government’s email subscription.

Buying a home with student loans

Juggling education debt doesn’t have to keep you from becoming a homeowner. You can still buy a home with student loan debt, especially with the launch of new programs like Maryland’s SmartBuy initiative.

Even if you’re ineligible for Maryland SmartBuy or don’t plan to live in the state, you can still make your dream home happen. For information and resources, check out our guide to qualifying for a mortgage with student loan debt.