At 26 years old and with $30,000 in student loan debt, Jasmine Townsel thought home ownership for her and her fiance was out of reach. But as she looked into the home-buying process, she heard about an exciting new program designed to help young graduates like her.
“The program came at the right time because we had just started looking for a house,” Townsel told The Baltimore Sun.
On September 30, she became the first person to take advantage of the Maryland SmartBuy program. Now the proud owner of a townhome, she also eliminated her student loan balance in one move.
Students loans and buying a house
For millions of people, becoming a homeowner is still the cornerstone of the American dream. However, student loan debt can make that dream feel out of reach.
If you have student loan debt, the thought of keeping up with your payments is difficult enough. Getting a mortgage can seem downright impossible. According to a Student Loan Hero survey, 41 percent of college-educated Americans with student loans reported postponing buying a home because of their debt.
However, student loan debt doesn’t have to keep you from becoming a homeowner. You can still buy a home while juggling loans, especially with the launch of new programs like Maryland’s SmartBuy initiative.
What is the Maryland SmartBuy program?
At the end of November, the state of Maryland announced a revolutionary new program to help homeowners with student loan debt. The Maryland SmartBuy program will empower young graduates to become homeowners while simultaneously helping them better manage their loans.
Maryland Lt. Governor Boyd Rutherford noted that student loan debt could prohibit people from “reaping the benefits” of homeownership, and keep them from building equity in a home.
The $10 million Maryland SmartBuy program allows people to buy a home while wiping out their student loan debt at the same time.
At an event announcing the innovative new program, 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,” said Rutherford.
How does the program work?
Under the Maryland SmartBuy program, if a buyer has five percent as a down payment on a home, the state will contribute up to 15 percent of the final purchase price of the house toward the buyer’s student loan balance. The buyer must pay the remaining student loan balance in full by the house’s closing date.
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 five percent — for the down payment. The state would provide $30,000 — or 15 percent — towards your student loan balance, paying off your loans while you bought your home.
Who is eligible?
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 percent of the home’s sale price.
You must have used your student loans to attend a postsecondary school accredited by the U.S. Department of Education, and you need to show verification from your lender showing the amount you still owe.
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.
All individuals interested in buying a home under the Maryland SmartBuy program need to take a homebuyer education class approved by the U.S. Department of Housing and Urban Development, Fannie Mae, or Freddie Mac. In some jurisdictions, online classes are available.
While the Maryland SmartBuy program is mostly limited to first-time homebuyers, the state can waive that restriction under specific circumstances.
There are targeted areas that the state opens up to other buyers as an added incentive, and if you have not owned a home in more than three years, you may be eligible. If you are an honorably discharged veteran, you can also qualify for the program.
Buying a home with student loans
Right now, this new program is limited to Maryland residents. But it’s an exciting change that addresses major issues affecting young graduates and workers who are balancing their student loan debt and dreams of owning a home.
If you have student loan debt, you can still become a homeowner, even if you don’t live in Maryland. For information on how to buy a home with student loans, check out this article on how to get a mortgage while carrying a loan balance.