Qualifying in Maryland While You Still Own the Old House
Program and regulatory figures verified September 25, 2026. Details change; confirm your scenario with us.
Two numbers decide a Maryland file: whether the departing payment stays in your ratio, and what the new home's taxes are without a homestead cap behind them.
Start from the default
Underwriting assumes both payments. Your current mortgage principal and interest, its taxes and insurance, any association dues, plus the same on the home you are buying. Both sit in the ratio until a documented rule removes one.
The new home's tax line is the part people underestimate
Maryland's Homestead Tax Credit caps growth in the taxable assessment of an owner-occupied principal residence, and under Md. Tax-Property 9-105 the credit is unavailable for a taxable year where the dwelling was transferred for consideration to new ownership during the previous taxable year.
Your purchase is that transfer. So the seller's tax bill, which may reflect years of capped growth, is not your bill. Underwrite the new payment on the current assessment. In a market where assessments have run ahead of capped taxable values, that difference is large enough to change a debt-to-income ratio. See the homestead reset page.
And file your own application by June 30 for the following taxable year, since a late filing may disqualify you for that year.
The rental offset, precisely
Fannie Mae B3-3.8-05, dated 09/02/2026, allows a departing primary residence converted to an investment property to produce qualifying rental income, with conditions:
- The lender must document a current housing payment first.
- Market rent comes from a complete appraisal with market rents, a Form 1007, or market tools with at least three comparable rentals. Leases are not permitted.
- Adjusted net rental income is gross rent times 75% less that property's PITIA.
- Positive offsets that PITIA only. Negative is added to the ratio.
The ceiling on how much this helps is neutral: the departing home stops counting.
Using the equity, and pricing the tax on it
Where the ratio will not carry both payments, a larger down payment on the new home lowers the new payment, and the departing home's equity can fund it.
In Maryland that route is taxed. Md. Tax-Property 12-108(e) applies recordation tax to a supplemental instrument to the extent the amount of unpaid outstanding principal debt is increased, and the 12-108(g) refinancing exemption shelters only the unpaid principal being refinanced, by the original mortgagor. Price it before you commit. See the recordation tax page.
Reserves
Where the ratio is tight, reserves complete the file. B3-3.8-05 requires six months of reserves on the vacated property's PITIA when the borrower has less than 12 months of property management experience, on top of reserves for multiple financed properties. Bridge structures separately tier reserves against local marketing time, and Maryland's largest markets were flat in August 2026. See the market page.
The ceiling
Maryland's 2026 one-unit limit is $832,750 in 19 jurisdictions, $1,249,125 in Montgomery, Prince George's, Frederick and Charles, and $1,209,750 in Calvert. Above the applicable limit you are on investor guidelines rather than agency rules. See the jumbo page, and the two common situations on under contract but not closed and listed but not sold.
Frequently asked questions
Do both mortgage payments count when I buy before selling in Maryland?
Yes, by default. Underwriting includes the full PITIA on the departing residence and on the new home until a documented rule removes one, and the main such rule is the departing-residence rental offset under Fannie Mae B3-3.8-05.
Should I use the seller's property tax bill to estimate my new Maryland payment?
No. Under Md. Tax-Property 9-105 the Homestead Tax Credit is unavailable for a taxable year where the dwelling was transferred for consideration to new ownership in the previous taxable year, so the seller's capped bill does not carry over. Underwrite on the current assessment.
Can rental income from my old Maryland home increase my purchase price?
No. Under B3-3.8-05 a positive adjusted net rental income may offset the departing residence's PITIA only and never adds qualifying income. The best outcome is that the old payment stops counting against your ratio.
Is there a tax cost to borrowing against my Maryland home for the down payment?
Yes. Md. Tax-Property 12-108(e) applies recordation tax to a supplemental instrument to the extent the amount of unpaid outstanding principal debt is increased, and the refinancing exemption in 12-108(g) shelters only the unpaid principal of the loan being refinanced, by the original mortgagor. Rates are county-set.
Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal, tax, or real estate advice. Maryland recordation tax rates are set by each county and Baltimore City, and the Homestead Tax Credit is administered by the State Department of Assessments and Taxation; your county finance office, your CPA or a Maryland attorney, and your real estate agent each handle their own part. Loans are subject to borrower and property qualification.