How to Buy a House in Maine: 6 Steps

Purchasing a house is a major financial decision that requires careful consideration. In Maine, the average home value is $410,347, which is higher than the national average of $362,481. Prospective buyers in Maine should be prepared for potentially higher financial commitments compared to other states.

Understanding down payment assistance programs, mortgage types and state-specific regulations and requirements can ensure a smooth journey toward homeownership in the Pine Tree State. MoneyGeek compiled essential pointers to help you navigate the homebuying process in Maine, from saving for the down payment to finding the best financing option for your needs and credit history.

According to data from the U.S. Census Bureau, the homeowner vacancy rate in Maine in the second quarter of 2024 was 1%. The homeowner vacancy rate measures the percentage of vacant homes available for sale, which helps gauge the balance between housing supply and demand.

The stable homeowner vacancy rate is 2%, which allows homebuyers some choice and flexibility in where to live. Maine's rate of 1% suggests high housing demand for limited inventory. For homebuyers in Maine, this could mean facing a competitive market with potentially higher prices and fewer choices.

Before buying a house in Maine, closely examine your financial and credit history. A strong financial profile improves your chances of getting approved when applying for a mortgage.

Your credit score significantly impacts the mortgage loans and interest rates you qualify for. A higher score increases your chances of securing a reasonable rate. According to Experian, the average credit score in Maine is 731.

If you have bad credit, defined by FICO as a score below 580, buying a house is still possible, though getting approved for a mortgage might be challenging. Check the table below to see which mortgage type is ideal for you based on the minimum credit score requirements.

Source: Experian

Your debt-to-income ratio (DTI) is a vital measure that lenders use to determine how much of your monthly income goes towards debt payments. This helps them evaluate the amount of mortgage debt you can responsibly take on. In Maine, the average mortgage debt was $167,295, according to Experian. This figure highlights the additional financial responsibility that comes with homeownership in the region.

Monthly debt payments included in your DTI typically encompass mortgage, credit card, student loan, and auto loan payments, among others. Use our DTI ratio calculator below to see your front-end DTI, which considers housing-related debts, and back-end DTI, which includes all monthly debts, along with your total monthly debt payments.

Buying a house you can't afford can lead to financial strain, making it essential to carefully consider your budget. The 28% rule is a useful guideline, advising that you spend no more than 28% of your monthly income on mortgage payments. This approach helps ensure that your home purchase remains within your financial means, allowing you to comfortably manage other expenses.

According to the U.S. Bureau of Labor Statistics, the median annual income in Maine as of April 2024 was $47,590. This translates to a gross monthly income of $3,966 before taxes. Applying the 28% rule, you should aim to spend no more than $1,110 on your monthly mortgage payment.

Use our mortgage calculator below for a more precise estimate tailored to your situation.

A down payment is the initial amount you pay upfront when buying a house, typically representing 20% of the home's purchase price. This 20% standard can be a substantial hurdle for many homebuyers. In Maine, the average home value is $410,347, which means a 20% down payment would be $82,069. For a home valued above average at $460,000, the 20% down payment would be $92,000.

Fortunately, saving up for a 20% down payment is not a requirement. Many mortgage types allow for smaller down payments. For instance, VA loans require no down payment, and FHA loans require only 3.5%.

If you put down less than 20%, your lender may require you to take out private mortgage insurance. You can use our PMI calculator to estimate your monthly private mortgage insurance (PMI) premium based on your credit score and down payment.

Several down payment assistance programs in Maine make homeownership possible for many people. These programs provide financial support, reducing the initial financial burden for prospective homebuyers. Check out the table below for the available down payment assistance programs in Maine offered by MaineHousing.

Finding the right location in Maine involves several key considerations. Start by evaluating the average house price in areas you're interested in. Consider the proximity to your family, friends, and work or school. Access to public transportation, parks, restaurants and shopping centers can enhance your lifestyle and should factor into your decision.

The cost of living also influences your choice of a new home. According to the Missouri Economic Research and Information Center (MERIC), Maine's cost of living index in the first quarter of 2024 is 111.3, which is higher than the national average of 100. When choosing the right location, consider these essential expenses:

• Food
• Healthcare
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

Use the table below to see some cities in Maine and their average home values. You can also use our cost of living calculator to help you estimate how much you'll need to pay for all the essentials in different locations.

Source: Zillow

Working with a real estate agent can significantly speed up your house hunt in Maine. They provide the advice you need, assist with paperwork, and offer an expanded list of property options unavailable to you alone. Additionally, they can recommend other service providers like title companies and inspectors, helping you navigate the homebuying process in Maine.

When finding a real estate agent, ensure you do your due diligence by interviewing those with experience in your desired neighborhoods. Consider these tips:

• Find someone compatible with your needs and personality
• Verify the agent's credentials, training, and licensure
• Ensure they have in-depth knowledge of the area
• Shop around for agents and compare their rates

You can also use the license holder search tool from the Maine Real Estate Commission to find or verify real estate agents in Maine.

The homebuying process in Maine requires careful consideration of the best mortgage you can afford. Options include conventional, jumbo, FHA, VA and USDA loans. You can choose from loan terms of 10, 15, 20 or 30 years. Additionally, deciding between a fixed-rate mortgage or an adjustable-rate mortgage (ARM) is crucial. Selecting the right financing option can boost your approval chances and save money over time.

Interest rates on a mortgage can change daily due to various factors, including the type of mortgage, the lender, and the economy. The annual percentage rate (APR) differs from the interest rate as it includes additional costs like fees, providing a clearer picture of the actual cost of borrowing.

As of September 2024, the APR for a 30-year fixed conforming loan in Maine is 6.04%, while the APR for a 30-year fixed rate FHA loan is 7.86%. The table below shows the current mortgage rates in Maine by mortgage type.

Getting pre-approved for a mortgage in Maine helps you understand your budget and demonstrates to sellers that you are a serious buyer. Lenders usually issue a mortgage pre-approval letter, which states the loan amount you are qualified for based on a thorough review of your financial situation. This letter is typically valid for 60 to 90 days, giving you a specific timeframe to find a home and finalize your loan.

To get pre-approved, you'll need to submit several documents that verify your financial status. These include:

• Proof of income, such as pay stubs or tax returns
• Credit history
• Identification, like a driver's license or passport
• Bank statements
• Employment verification

Home inspections are highly recommended in the homebuying process in Maine. Inspectors typically examine key components of the house, such as the roof, plumbing, electrical systems, HVAC and structural elements. The inspection report provides a comprehensive overview of the property's condition, highlighting any areas that may require repair or further evaluation.

For example, an inspection might uncover significant issues like a faulty roof or outdated electrical wiring. Such findings can impact the home's appraisal, potentially lowering its value. This could lead the buyer to reconsider their offer, especially if the cost of repairs is substantial.

Maine does not regulate home inspections or require home inspectors to be licensed. Despite the lack of regulation, many home inspectors in the state voluntarily obtain certification and adhere to standards set by professional organizations such as the American Society of Home Inspectors (ASHI) or the International Association of Certified Home Inspectors (InterNACHI). This voluntary certification can provide some assurance of quality, even in the absence of state licensing requirements.

If you're looking for a home inspector in Maine, ensure they are licensed. Although the state does not mandate licensing, choosing a certified inspector can offer peace of mind. It's also wise to check what other clients have said by reading online reviews and asking for references. These steps can help you gauge the inspector's reliability and professionalism.

Home appraisals determine a property's fair market value. This ensures that buyers pay a reasonable price and helps lenders decide on the loan amount. According to the 2023 Appraisal Survey from the National Association of Realtors (NAR), the median appraisal cost in 2023 was $500.

A home appraisal differs from a home inspection. While appraisals focus on the property's value, inspections assess its condition. Lenders require appraisals to confirm that the property's value supports the loan amount. This distinction between inspections and appraisals helps protect both buyers and lenders from potential financial risks.

Closing is the final step of buying a house in Maine, where the final transfer of ownership occurs and you receive the keys to the property. Your lender must provide a closing disclosure document three days before the official closing. This document includes loan terms, projected monthly payments, fees and other closing costs. Plan a final walk-through of the property with your real estate agent near closing day to ensure it's still in the expected condition.

During closing day, you'll review and complete a lot of paperwork. Some of the key documents you need to sign include:

• Final loan application: Confirms all the details of your loan, including the interest rate and loan amount. It verifies your financial information and ensures everything is accurate before finalizing the loan.
• Deed transfer: Transfers property ownership from the seller to you. It is a legal requirement to officially become the home's new owner.
• Promissory mortgage note: Outlines your loan repayment terms, including the amount you owe, the interest rate and the repayment schedule. It is a legal promise to repay the loan under the specified terms.
• Homeowners insurance: Protecting your new home is essential. Maine home insurance covers potential damages to your home and provides peace of mind as you settle into your new property.

Closing costs are fees paid at the end of a real estate transaction, covering various services required to finalize the purchase. In Maine, buyers can expect to pay an average of $3,637 in closing costs, according to NAR. These costs include several specific fees:

• Appraisal fee: The cost of having a professional appraiser determine the property's value.
• Title search and insurance fee: Fees for verifying the property's title and securing insurance to protect against future title disputes.
• Escrow deposit: Funds held in a mortgage escrow account to cover future property taxes and insurance premiums.
• Prepaid costs: Advance payments for property taxes, homeowners insurance and mortgage interest.
• Other closing costs: Additional fees such as loan origination, recording and credit report fees.

If you are a first-time homebuyer, learning about the different first-time homebuyer programs in Maine can help you achieve homeownership faster.

Buying a house in Maine was a significant financial commitment that lasts for years. We answered some frequently asked questions about buying a house in Maine to kickstart your homebuyer journey.