Have you heard of Maryland SmartBuy 3.0? If you are carrying student loan debt and shopping for a first home in Maryland, this is the state program built around the idea that those are one financial problem rather than two.
The Maryland Mortgage Program, administered by the Community Development Administration inside the Department of Housing and Community Development, will retire your student loans in full at the closing table — up to 15% of the purchase price or $25,000, whichever is lower. Everything below is pulled from the Maryland SmartBuy 3.0 fact sheet updated 06/01/2026, the MMP income and acquisition cost limits effective June 24, 2026, and the MMP interest rate sheet posted Friday, September 4, 2026 at 10:00 AM.
What Maryland SmartBuy 3.0 Actually Does
SmartBuy 3.0 pairs a conventional 30-year first mortgage with a separate pot of money that exists for one purpose only: erasing eligible student debt on the day you buy. The first mortgage is a standard MMP loan financing up to 97% of the purchase price, pooled into Fannie Mae or Freddie Mac mortgage-backed securities and subject to every MMP, US Bank, and mortgage insurer guideline that governs the rest of the product line.
The student debt assistance itself is a 0% interest deferred promissory note. It is not secured by a lien on the property, and the fact sheet is explicit that the money is used exclusively to pay off eligible student loan debt at the time of closing.
Maryland SmartBuy 3.0 is a conventional MMP first mortgage paired with a 0% deferred note that pays off student debt at closing. The note is capped at 15% of the purchase price or $25,000, whichever is lower.
How Much Student Debt The Program Will Retire
Two numbers set the boundaries. You need a minimum remaining student loan balance of $1,000 to qualify at all, and the maximum eligible payoff is 15% of the home purchase price or $25,000, whichever is lower.
The rule that surprises people is the all-or-nothing requirement. The entire outstanding balance for at least one borrower must be completely paid off at closing, and partial payoff is not permitted under this program.
If your balance runs past the ceiling, you are not disqualified — you cover the difference out of pocket. A borrower with $31,000 in loans buying at $350,000 takes the $25,000 from SmartBuy and brings the remaining $6,000 to closing themselves.
Note that the percentage and the dollar cap swap places depending on price. At any purchase price above roughly $166,667 the $25,000 ceiling binds, while below that the 15% calculation governs: a $150,000 purchase in Allegany or Garrett County caps the payoff at $22,500 no matter what you owe.
SmartBuy 3.0 pays the lower of 15% of the purchase price or $25,000. You need at least $1,000 in student debt, and one borrower's full balance must be cleared at closing — partial payoffs are not allowed.
The debt itself has to clear several tests before a lender will reserve the loan. Eligible student debt under SmartBuy 3.0 includes but is not limited to the following conditions:
- Borrower-owned and borrower-used. The student loan must belong to the borrower and must have been used for the borrower's own education. Personal loans from private individuals are not eligible.
- From a qualifying institution. Eligible schools include accredited public, nonprofit, or proprietary colleges, universities, vocational schools, and other postsecondary institutions eligible to participate in federal student aid programs administered by the U.S. Department of Education.
- Documented and visible. The loan must be identifiable as education-related debt and must appear on the borrower's credit report. A monthly statement or written verification from the servicer documenting the outstanding balance goes in the file.
- Current, in either status. The loan may be in repayment or in deferred status, but the borrower must be current on the obligation at both SmartBuy reservation and closing.
- Both borrowers, potentially. If two borrowers each carry eligible debt and both balances can be fully paid within program limits, both may be paid in full.
All of these conditions point the same direction: SmartBuy is designed to take one borrower's education debt to zero, verified after the fact, rather than to make a dent in a large balance.
The Five-Year Forgiveness Clock
The promissory note carries no monthly payment during its term. It is forgiven over a five-year period at a rate of 20% per year on each anniversary date, which means the benefit is earned through occupancy rather than granted outright at settlement.
If the property is sold before the five-year forgiveness period ends, the remaining unforgiven balance must be repaid upon sale. Keep in mind that this is a cliff-free schedule — every anniversary you clear permanently removes another fifth of the obligation.
Refinancing is treated more gently than selling. If you refinance the SmartBuy first mortgage to reduce your interest rate, the existing promissory note may remain in place and continue forgiveness on the original five-year schedule, provided CDA or US Bank is notified.
Here is how the schedule runs on a $22,000 payoff:
| Anniversary reached | Forgiven to date | Owed if you sell |
|---|---|---|
| Closing day | $0 | $22,000 |
| Year 1 | $4,400 | $17,600 |
| Year 2 | $8,800 | $13,200 |
| Year 3 | $13,200 | $8,800 |
| Year 4 | $17,600 | $4,400 |
| Year 5 | $22,000 | $0 |
The SmartBuy note is forgiven 20% per year on each anniversary, with no monthly payment during the five-year term. Sell before year five and the unforgiven balance is repaid from the sale proceeds.
Income, Purchase Price, And Credit Limits
The credit requirement is the first place SmartBuy diverges sharply from the rest of the Maryland Mortgage Program. The minimum required middle credit score for SmartBuy 3.0 is 720, which sits 80 points above the 640 floor that applies to standard MMP purchase loans at LTVs up to 97%.
Household income limits and maximum acquisition costs vary by county, by household size, and by whether the property sits in a Targeted Area. The figures below come from the MMP limits table effective June 24, 2026, and they are worth checking against the current table before you write an offer.
| Jurisdiction | Income limit (1–2 person) | Income limit (3+ person) | Max acquisition cost |
|---|---|---|---|
| Baltimore County (non-targeted) | $140,759 | $161,873 | $782,118 |
| Baltimore County (targeted) | $164,520 | $191,940 | $955,922 |
| Baltimore City (fully targeted) | $164,520 | $191,940 | $955,922 |
| Howard County | $140,759 | $161,873 | $782,118 |
| Montgomery / Prince George's | $199,320 | $232,540 | $1,306,974 |
Be aware that "Household Income" here is a broader number than the qualifying income on your loan application. It is the combined income of every person 18 or older living in the household, including retirement income, near-cash government transfers, and investment gains.
Two more MMP-wide screens apply. You may not own any other real property at the time of closing, and liquid assets above 20% of the purchase price trigger an asset test that can affect eligibility.
SmartBuy 3.0 requires a 720 minimum middle credit score. Household income and purchase price limits vary by county and household size — Baltimore County non-targeted runs $140,759 for a 1–2 person household.
SmartBuy is generally limited to first-time homebuyers, but the requirement is waived if you are purchasing in a designated Targeted Area, have not owned a principal residence in the previous three years, or are an honorably discharged veteran using the veteran exemption. Allegany, Caroline, Dorchester, Garrett, Kent, and Somerset counties plus Baltimore City are fully Targeted, while Baltimore, Anne Arundel, Frederick, Harford, Montgomery, Prince George's, Washington, and Wicomico counties contain Targeted Areas in part.
Every SmartBuy borrower also has to complete an approved Homebuyer Education course before closing and occupy the home as a primary residence. If you are weighing Maryland against other markets first, our state-by-state housing affordability map is the better starting point.
The Down Payment Assistance You Can Stack
SmartBuy 3.0 layers with standard MMP down payment assistance, with one notable exclusion. Two DPA options are available: a flat $6,000 loan, or a loan equal to 6% of the first mortgage amount that is reserved for borrowers earning 50% or less of Area Median Income.
Both DPA loans are 0% deferred second mortgages due upon sale, payoff, transfer, or refinance of the first mortgage. Unlike the SmartBuy note itself, these do record as liens, subordinate to the MMP deed of trust.
Partner Match funds are not available under SmartBuy 3.0. You may still combine the product with assistance from employers, builders, developers, or nonprofit organizations, provided all MMP, investor, and underwriting requirements are met and the maximum combined loan-to-value of 105% is not exceeded.
The unsecured SmartBuy promissory note is not included in the CLTV calculation. That matters: a 97% first mortgage plus a $6,000 DPA second still leaves room under the 105% ceiling even though the total assistance package looks much larger on paper.
On the rate sheet posted Friday, September 4, 2026, SmartBuy conventional pricing was 7.250% with no DPA and 7.250% with the $6,000 DPA, and 7.125% with the 6% DPA for borrowers at or below 50% AMI. Posted rates change daily or more frequently, and the rate locks once the loan is reserved in Lender Online — your rate depends on when you reserve, your credit, and your LTV.
Worked Example: $350,000 In Baltimore County With $22,000 In Student Loans
Picture a two-person household buying a $350,000 townhome in a non-targeted part of Baltimore County, with combined household income under $140,759, a 720 middle score, no other real property, and $22,000 in remaining federal student loans. They are first-time buyers taking the $6,000 DPA.
The $22,000 balance sits under the $25,000 program ceiling and far under 15% of the purchase price, which works out to $52,500. The entire balance clears at closing.
| Line | Amount | Terms |
|---|---|---|
| Purchase price | $350,000 | Under the $782,118 acquisition cost limit |
| First mortgage (97% LTV) | $339,500 | 30-year fixed, 7.250% posted 09/04/2026 |
| Minimum down payment | $10,500 | 3% of purchase price |
| MMP DPA | $6,000 | 0% deferred second lien, due on sale or refinance |
| SmartBuy student debt note | $22,000 | 0%, unsecured, forgiven 20% per year |
| Down payment gap after DPA | $4,500 | Plus closing costs and prepaids |
| Combined loan-to-value | 98.7% | Against the 105% CLTV ceiling |
Principal and interest on $339,500 at 7.250% runs approximately $2,316 per month. Add mortgage insurance — MMP's own APR illustration uses an annualized 0.85% rate for HFA Preferred coverage at 97% LTV, roughly $240 per month here — plus Maryland property taxes, hazard insurance, and any ground rent or HOA charges.
The number that does not appear on the payment schedule is the one that often decides the file. Whatever that $22,000 balance was costing monthly comes off the debt-to-income calculation entirely, and MMP conventional loans run to a 50% DTI ceiling when the automated underwriting system returns approved-eligible.
Closing costs are their own line of study in Maryland, where state and county transfer and recordation taxes are split by contract and can move several thousand dollars. Our breakdown of Maryland county transfer tax mechanics walks through how those charges are calculated and who typically pays them.
What A Sale In Year Three Costs
Say this buyer takes a job in Charlotte 30 months after closing, having cleared two anniversaries. Forty percent of the note is forgiven, leaving $13,200 of unforgiven balance due at sale, plus the $6,000 DPA second that comes due on transfer.
That is $19,200 out of the sale proceeds before agent commissions or transfer taxes. Waiting six more months to close after the third anniversary drops the note repayment to $8,800 and the total program repayment to $14,800.
Selling 30 months after closing, a $22,000 SmartBuy note is 40% forgiven, leaving $13,200 due. Add a $6,000 DPA second that comes due on transfer and the sale costs $19,200 in program repayment.
What The Closing Disclosure Has To Show
The entire outstanding balance of the eligible student debt must be paid off at closing and reflected on the Closing Disclosure. Post-closing documentation then has to confirm that the borrower's eligible student debt balance has been reduced to zero.
The lien structure is worth understanding before you sit down with the CD, because the assistance is not two mortgages. The first mortgage records as the primary deed of trust, a DPA loan records as an entirely separate subordinate lien after that deed of trust, and the SmartBuy note records no lien at all.
Mechanically, the lender funds the promissory note upfront at closing in the same manner as standard MMP down payment assistance, and CDA reimburses the lender afterward. From your side of the table, that means the student loan payoff behaves like any other disbursement on the settlement statement.
The full student loan payoff must appear on the Closing Disclosure, and post-closing documentation must confirm the balance reached zero. The SmartBuy note is unsecured and records no lien against the home.
Which Lenders Can Originate SmartBuy 3.0
Financing for Maryland SmartBuy is available only through SmartBuy-approved lenders, which is a narrower list than the MMP roster. More than 100 approved lenders operate statewide, and all of them serve borrowers anywhere in Maryland regardless of branch location.
The MMP lender directory carries a Loan Type filter with a Maryland SmartBuy option, and that filtered list is the shortlist worth calling. Do not assume that an MMP-approved loan officer is cleared to originate SmartBuy — ask before you reserve.
On the underwriting side, SmartBuy is conventional only. Overlays from US Bank, Fannie Mae, Freddie Mac, and the approved mortgage insurers all apply, both automated and manual underwriting are permitted, and Fannie Mae loans must use HFA Preferred mortgage insurance while Freddie Mac loans must use HFA Advantage.
Where SmartBuy Fits In A Longer Ownership Plan
The five-year clock and the due-on-sale DPA both reward staying put, which makes SmartBuy a poor fit for a buyer who expects to relocate quickly and a strong one for a buyer settling in. If your time horizon is short, price the unforgiven balance into the decision the way you would price a prepayment penalty.
Maryland buyers in the city itself have one additional wrinkle to work through before they compare programs, since Baltimore ground rent and its effect on financing can change both the payment and the title work. Buyers comparing state housing finance agencies more broadly may find it useful to read how Indiana's First Place and Next Home programs structure their assistance, or how Florida's Hometown Heroes program varies by county.
Over a long enough hold, the forgiven note and the principal paydown do the same job from different directions. Our piece on home equity as a generational wealth engine covers how that compounding actually accrues.
Before You Reserve
The terms and conditions of SmartBuy 3.0 are subject to change until a borrower qualifies for the loan and locks the interest rate. Confirm the fact sheet date, the current limits table, and the posted rate with a SmartBuy-approved lender before you make an offer.
You may want to consider running the numbers both ways — with the payoff and without — so you can see what the DTI relief is worth against the 720 score requirement and the five-year commitment. For most first-time Maryland buyers carrying education debt, that comparison is the whole decision.
This article is for informational purposes and is not financial or mortgage advice. Consult a licensed professional in your jurisdiction.