Maine conjures images of rugged coastlines, peaceful lakes and wooded hiking trails. So it's not surprising, vacation homes are a major force in Maine's housing market. The good news for buyers is properties in Maine remain affordable, especially compared to other regions of the Northeast. And with a 3.9 percent unemployment rate as of July 2016, Maine boasts a strong job market. Whether you're a full-time resident or a part-time visitor, this guide will walk you through the process of qualifying for a mortgage in Maine, with a special focus on first-time buyers.
Check Mortgage Rates in Maine
Your ability to qualify for a loan, and the rate you'll pay for the mortgage, depends mainly on your credit score. However, regional trends in state and local markets also can affect the availability and costs of mortgages. One wild card is the foreclosure rate, and Maine's rate of mortgage defaults is around the national average, according to RealtyTrac. As a "non-judicial foreclosure state," Maine does not require lenders to navigate a lengthy legal process before repossessing homes. For more about what moves the interest rates on home loans, See MoneyGeek's mortgage rates guide.
First-Timer? Maine's Homebuying Help
First-time buyers should take a look at the Maine State Housing Authority's First Home Loan. This program for those who take a hoMEworks buyer education course includes $3,500 in down payment assistance. Borrowers pay no points, and the 30-year mortgage comes with a competitive rate. Income limits vary by area, but they top out at $96,800 for a family of three or more in York. The price limit is $285,000 for much of the state for a one-unit home. The state also offers veterans up to $3,500 in down payment assistance through Salute ME loans.
Some cities in Maine also offer programs for first-time buyers. Auburn and Lewiston's down payment assistance, for instance, each offer no-interest loans for up to $15,000 to cover closing costs for those earning more than $25,000 a year. Both cities offer HOME Savings Accounts encouraging buyers to build a nest egg - the program provides $2 for each $1 saved by the borrower. For a thorough overview, visit MoneyGeek's first-time homebuyers guide.
Need Financial Assistance? See Maine's Programs for First-Time Buyers
Here's MoneyGeek's overview of down payment assistance, closing cost aid and other financial help.
Find a Housing Counselor in Maine
Understanding Home Affordability in Maine
Affordability in Maine is skewed by the state's status as a second-home market for affluent buyers from New York, Boston and elsewhere. Their ability to buy waterfront homes is disconnected from the local job market. However, even the luxury market looks like a bargain compared to other parts of the country: Lakefront homes and coastal mansions priced at more than $2 million are rare. In general, Maine remains an affordable housing market. In the Portland metro area, 78.4 percent of homes sold in the second quarter of 2016 were affordable to a typical buyer, says the National Association of Home Builders/Wells Fargo Housing Opportunity Index. That's based on a median home price of $235,000 and median family income of $76,800.
How Maine's Mortgage Rates and Home Prices Affect Monthly Payments
|Metro Area||Estimated Monthly Mortgage Payment*||Q1 2016 (Change from Previous Year)||2015 Median Home Price||2014||2013|
|Portland-South Portland-Biddeford||$1,065||$226,600 (+4.30%)||$237,300||$227,700||$228,900|
Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today's rates.
Determine How Much You Can Borrow in Maine
Statewide, there's a $417,000 cap for mortgages backed by Fannie Mae and Freddie Mac. Borrow more than that requires a jumbo loan, which can come with a higher interest rate and stricter underwriting standards than a conforming loan. There's a bit more variation in Maine's FHA limits, which range from $271,050 in much of the state to $302,450 in Portland and York.
To see a county-by-county break down of Maine's loan limits, check here:
Buying a Home in Maine: Experts Weigh In
April Gleason is vice president of lending at University Credit Union. She also serves on the boards of hoMEworks and the Maine Association of Mortgage Professionals.
Greg Gosselin owns Gosselin Realty Group and Seacoast Region Developers in York and is 2016 vice president of the Maine Association of Realtors and 2015 Maine Realtor of the year.
John Reed is president and CEO of Maine Savings Federal Credit Union, the state's largest credit union mortgage lender. He also runs CUSO Home Lending, a mortgage company owned by eight credit unions and the Maine Credit Union League.
What advice would you give to a first-time buyer?
I highly recommend first-time homebuyers take a first-time homebuyer course. The 10-hour hoMEworks course is offered by many of the nonprofit agencies in the state. Not only does it go over everything from understanding credit to lending products, it also covers budgeting, homeowners insurance and finding the right Realtor and home inspector.
Get pre-approved. Try to have 20 percent down to avoid private mortgage insurance. Avoid bank-owned properties as a first home.
First, meet with a loan officer before you start your home search. Be prepared to provide documentation. Have your own budget in mind as to what you think you can afford for a payment. Also, find a reputable real estate agent.
What's the biggest challenge for buyers right now?
I see two main obstacles for borrowers. The first is their debt-to-income ratio. The second is Maine has very old housing stock and many buyers are looking for a "great deal." The problem is many of these homes have deferred maintenance and safety issues.
Inventory is low and sales are up in Maine, so properly priced homes are experiencing multiple offers, which is driving up prices. Affordability is a challenge along the coast.
Southern Maine is very competitive, with limited housing inventory.
How has your market changed through the volatility of the past decade?
Maine tends to see less of the ups and downs that markets outside of the state do. But we still have to live with all the regulations created by what happened throughout the country.
The coastal communities and lake properties have rebounded. Some communities, such as Sanford and Biddeford, continue to struggle with foreclosure inventory and shadow inventory, keeping the values down in parts of the communities. The luxury home market continues to be strong throughout the state, and new construction is still low.
The mortgage process requires more documentation, is more time consuming and more costly.
What's unique about Maine's market?
How rural most of the state is. In Portland, there are plenty of comps for appraisals. But sometimes, the appraiser needs an ATV to reach the property.
Maine has more second homes than primary homes.
Our home prices don't seem to rise as much or as quickly and don't seem to drop as much or as quickly as in other states.
Don't Forget Closing Costs in Maine
Remember, when you buy a home, you also will be hit with closing costs. In Maine, fees that go along with getting a loan are slightly above the national average, a 2016 survey by Bankrate.com shows. A borrower who takes out a $200,000 loan can expect to pay $2,185. The national average is $2,128. Among the fees are $530 for attorney expenses and $507 for an appraisal. Because closing costs can be negotiated, and fees can vary among mortgage lenders, you might save a few bucks by shopping around. Visit MoneyGeek's closing costs page for a fuller explanation of what closing costs consist of and what to expect.
Average Closing Costs in the Pine Tree State
Source: Bankrate's 2015 survey of closing costs.
Refinancing a Mortgage in Maine
Maine has seen only modest increases in home values in recent years. Prices inched up less than 11 percent from early 2011 through early 2016, trailing nationwide appreciation of 27 percent, according to the Federal Housing Finance Agency. That's probably not great news for homeowners who hope to refinance. While today's microscopic mortgage rates are tempting, lenders usually want borrowers to take less than 80 percent of the home's value. That might explain why refinancings are rare in Maine. FHFA counted just 2,232 refis in the state during the first five months of 2016.
Still, rates have fallen so low it's worth taking a look at how much you could save with a refi. If, for instance, you took out a $200,000 loan at 5 percent interest, your monthly payment would be $1,074. Refinancing the same amount at a 3.5 percent rate would reduce your payment to $898 a month. Or, to pay down your principal more quickly, you could refinance into a 15- or 20-year term. MoneyGeek's guide to refinancing your mortgage covers more information about refis.
Other Maine Mortgage Resources
This program for first-time buyers includes $3,500 in down payment assistance. Income limits and home price limits apply.
These mortgages for veterans offer up to $3,500 in down payment assistance.
A list of lending institutions offering Maine State Housing Authority loans.
These courses help walk buyers through the process of finding a house and qualifying for a loan.
The city's homeowner assistance includes loans to rehabilitate properties.
The city offers no-interest loans for up to $15,000 to cover closing costs. Income limits apply.
This city also issues loans worth up to $15,000 for closing costs. Borrowers must make at least $25,000 a year.
The state housing authority keeps a list of real estate agents who work with first-time buyers.
This tool lets you compare how different down payments, interest rates and terms will affect your payment.