Everything You Need to Know About Buying a House in Maine

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If you’re looking to enjoy a slower-paced lifestyle, get outside and explore in forests and along the coast, or play in long, snowy winters, Maine is a great place to buy a house. You’ll need a 20% down payment and a credit score of at least 620 to secure a conventional mortgage loan in the Pine Tree State. 
If you are a first-time homebuyer or moving from out of state, navigating the real estate market and house-hunting process in Maine can be stressful.
That’s why home and car insurance comparison app Jerry is here to guide you through each step. From understanding your finances to submitting an offer for your dream house and everything in between, we’ve gathered everything you need to know about buying a house in Maine.
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Figure out your finances

If buying a house in Maine is your goal, you’ll have to spend some time clarifying your financial situation before doing anything else. 
Your credit score, debt-to-income (DTI) ratio, and the amount you expect to pay for a down payment and closing costs will all impact the kind of house you can afford.

Check your credit score

Your credit score is one of the most important factors when you are buying a house because it determines what type of mortgage you will qualify for. For a standard mortgage, lenders typically require a credit score of 620 or greater.
If your score isn’t quite high enough for a standard mortgage, you still have some options to start your house-hunting process.
  • Building your credit: Take some extra time to increase your credit score to 620, which will qualify you for a standard mortgage in Maine. This is a good option if you are still saving up for a down payment and aren’t quite ready to buy a house immediately.
  • Choosing a low-credit loan: The Federal Housing Administration (FHA) and Veterans Administration (VA) both offer mortgage options for homebuyers with lower credit scores. You can get an FHA low-credit mortgage with a credit score as low as 530, and you only need a 500 score to qualify for a mortgage through the VA. However, VA loan services are only available to active duty service members, veterans, and eligible spouses.

Calculate your debt-to-income (DTI) ratio

Your debt-to-income ratio—or DTI—is another important measure of financial wellness that a lender will consider when you apply for a mortgage.
To determine your DTI, start by adding all of your monthly payments together including:
  • Rent or house payments 
  • Car payments
  • Credit card payments
  • Student loan payments
  • Alimony or child support
Take the sum and divide it by your monthly income (before taxes) to get your DTI. A lower DTI is better; ideally, you should aim for a DTI of 36% or less to qualify for a standard mortgage in Maine. 
If your DTI is greater than 50%, you will likely struggle to get a mortgage until you pay off some of your existing debt.

Determine your down payment

The down payment is the portion of a house’s cost that you are responsible for paying upfront and is the largest payment you’ll make when buying a house. A standard mortgage usually requires a 20% down payment.
If you have a low-credit or low-income mortgage, your down payment will be reduced significantly. An FHA mortgage can have a down payment as low as 3.5%, while some veterans and active duty service members won’t be required to pay a down payment with a VA mortgage.

Prepare for closing costs and other fees

Closing costs are the other taxes, payments, and fees that you’ll have to pay when you buy a house. Nationally, they usually add up to between 2% and 5% of the house’s value and include:
  • Home appraisal fees
  • Credit report fees
  • Home inspection fees
  • Mortgage origination fees
  • Earnest money (i.e., a good-faith deposit that will go towards your down payment)
  • Mortgage insurance
  • Property taxes
  • Homeowners insurance
According to a 2020 survey from ClosingCorp, closing costs in Maine are around 1.28% of the purchase price of a house. 
Though costs can change due to differences in property taxes across the state, and additional insurance coverage you may need, the average Maine homebuyer should expect to pay between $3,500 and $4,000 in closing costs.
Key Takeaway Property taxes change depending on your municipality, so you will need to research the taxes in the areas you are interested in to get an accurate estimate of your closing costs.

Look for homeowners insurance

Though most of your closing costs are one-time payments, you will continue to pay for your homeowners insurance long after you buy a house in Maine. The average cost of homeowners insurance in the US is $1,387 per year, which comes out to around $115 per month.
The price of homeowners insurance will change depending on where you live, and the best way to make sure that you are getting the best price for your coverage is to compare quotes from different insurance companies.
Insurance broker app Jerry will simplify your search for the right homeowners insurance by doing all the shopping and comparisons for you. All you have to do is answer a few questions, and Jerry will get you the best quotes from up to dozens of top insurance companies.
Key Takeaway Taking a look at your financial situation——including your credit score, DTI, and potential down payment and closing costs—can help you start your Maine house-hunting process on the right foot.

Get preapproved for a mortgage

After you have spent the time to go through your finances, estimated the cost of your upfront payments, and researched your mortgage options, it’s time to apply for mortgage preapproval.
Getting a letter of preapproval from a mortgage lender is important before you start looking at houses in Maine. Not only will being preapproved for a mortgage give you more power to negotiate when you put an offer in for a house, but some sellers also won’t show their property to people who aren’t already preapproved.
To get preapproved for a mortgage, you’ll need to:
  • Provide your social security number along with information about your employment history, assets, debts, and bank account
  • Fill out a mortgage application
Don’t seek preapproval on a mortgage until you are ready to start looking at houses
When you submit a mortgage application, the lender will perform a hard credit check to determine whether you qualify for the loan. This can lower your credit score for a period and may hurt your chances of getting a mortgage if you reapply too soon.

How to pick the right mortgage in Maine

When you are applying for a mortgage in Maine, you’ll need to consider your preferred mortgage term and the impact it will have on the interest rate of the loan.
The two common mortgage terms—which specify how long you have to pay back your mortgage—are 15 years and 30 years
With a 30-year mortgage term, you will decrease your monthly payments but have a higher interest rate—usually close to 3.5%. On the other hand, you’ll have to pay more money each month in a 15-year term, but your interest rate will be lower, around 2.5%.

Look for a house

After you’ve finalized your budget and secured a mortgage preapproval, it’s finally time to start looking for your dream house in Maine.

Pick your city or neighborhood

There are a lot of things to consider if you are still trying to decide where you want to live in the state. Some things you will want to think about include your desired lifestyle, the culture of different cities, and the cost of living in different parts of the state.
As the northernmost New England state, not every part of Maine has the urban amenities you might want. 
Outside of larger cities like Portland, many towns don’t have reliable access to high-speed internet. If you are looking for a slower and less-connected lifestyle this may be a good thing, but you’ll want to consider this when house-hunting.
For people who love nature—especially nature in the winter—Maine is full of opportunities for hiking, camping, and spending time at the coast. Nicknamed the Pine Tree State, Maine has the highest percentage of land covered by forest in the country to complement its more than 5,000 miles of beaches.
The average cost of living in Maine is slightly lower than the national average, but living in areas including Portland, Biddeford, and Westbrook may cost more than in other parts of Maine.

Buyer’s market vs seller’s market

When you are looking for a house in Maine, it’s important to determine whether the area you are interested in is currently a buyer’s market or a seller’s market.
A buyer’s market happens when the demand for houses is lower than the number of houses being sold, which gives buyers more negotiating power. 
If you are making an offer on a house in a buyer’s market, you are more likely to succeed with a lower offer than the seller’s asking price. When many homes in the area are sitting for sale for a long time, you can assume you’re looking at a buyer’s market.
When the market is favoring sellers (a seller’s market), houses sell quickly and often for higher than the initial asking price because there are more buyers than there are houses on the market. If you are shopping in a seller’s market, it’s important to move quickly and make a strong offer when you find a house that’s right for you.

Find a real estate agent

If you are a first-time homebuyer, having a real estate agent can make the process of finding and buying a house in Maine much easier. It’s important to hire an agent who not only is familiar with the area but also understands what you are looking for in a house.
A real estate agent will take care of contacting sellers, setting up appointments to view houses, and submitting the paperwork to make an offer or close a sale.

Make an offer

When you find the house in Maine that’s right for you, all that’s left to do is make an offer and wait for the seller to accept it. 
Your real estate agent can give you advice about how much you should offer based on the real estate market conditions in the area, contact the seller’s agent, and help you submit all the necessary paperwork to buy your new home.

How to save on homeowners insurance

To protect your new house in case of damage or a disaster, having a good homeowners insurance policy is a necessity.
To avoid the hassle of shopping around for homeowners insurance yourself, let insurance broker app Jerry take care of all the shopping and comparisons for you. 
All you have to do is answer a few questions and Jerry will do the rest, getting you competitive quotes from top insurance companies to get you matched with the right coverage at the lowest price.
Jerry had a super simple app that was easy to navigate. And their terrific customer service made everything even easier. Plus I saved $700 in a single year.” —Lucia M.

FAQs

Since your down payment and closing costs will depend on where you live in Maine, your mortgage, and the kind of house you are looking for, you’ll need to factor all these things in when estimating the down payment and closing costs for a house in Maine.
In general, though, you’ll want to have around 25% of a house’s value saved up for a down payment and closing costs together.
To qualify for a standard mortgage in Maine, you’ll need a credit score of 620 or higher. If you have a lower score, you may be eligible for low-credit loans from the Federal Housing Administration (FHA) or the Veterans Administration (VA).
If you are looking for the least expensive places to buy a house in Maine, you’ll want to look for a home in places like Caribou, Presque Isle, Gardiner, and Calais. If you are looking for an urban lifestyle, cities like Portland, Lewistown, and Bangor may be best.

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