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Maine first-time home buyer programs

Maine is a state of fresh lobster, beautiful fall foliage and 3,478 miles of coastline. If you’re considering buying a home in the Pine Tree State, you should be aware of the special programs – from both the federal and Maine state governments – that make homeownership more attainable. You should also consider finding a financial advisor who can help guide you through the big financial decisions headed your way.

Federal First-Time Homebuyer Programs

Before we explore the programs designed specifically for Maine residents, we’ll examine the homebuyer programs offered by the federal government. It’s wise to consider both federal and state options when you’re conducting your mortgage search.

FHA Loans

Pros – Low down payment
– Low credit scores accepted
Cons – Applicants with low credit score may need to pay higher down payments
Eligibility – FICO® credit score of 500 or higher
– Must have 3.5% down payment
Best For – Anyone that doesn’t have a perfect credit history or sufficient funds for a down payment

The Federal Housing Administration backs FHA loans. Designed for borrowers that lack enough savings to afford the standard 20% down payment, FHA loans only require a 3.5% down payment.

To receive this perk in full, you must have a FICO® credit score of 580. If your credit score falls somewhere between 500 and 580, you’ll need to make a down payment closer to 10%. That’s still a significant improvement from the standard 20%. In fact, even with the credit score requirement, an FHA loan is one of the easiest federal programs to qualify for.

VA Loans

Pros – Up to 100% loan coverage
– No private mortgage insurance
– Usually comes with lower closing costs
Cons – Requires VA fee payment
– Long application process
Eligibility – Must be a current or former military member, spouse, or other beneficiary
– FICO® credit score of 620 or higher
Best For – Veterans with little monthly income or savings

The Department of Veterans Affairs insures VA loans, which help veterans who can’t afford a typical 20% down payment. Depending on your circumstances, a VA loan may not require any down payment at all. Plus, since the government will back part of your risk, you won’t have to get the usually obligatory – and often costly – private mortgage insurance (PMI).

While significant, those are the only benefits. VA loans often come with lower closing costs than a conventional  mortgage. To qualify, veterans usually need a credit score of 620 or higher. You also need to pay between 1.25% and 2.4% of your home’s value into the VA fund.

USDA Loans

Pros – No down payment
– Low credit scores accepted
Cons – Only available to those that can’t get a conventional mortgage
Eligibility – Must earn less than 115% of the adjusted U.S. median
– Home must be in an eligible area
Best For – Low- to mid-income individuals willing to live in the country

The United States Department of Agriculture (USDA) sponsors “Section 502 Single Family Housing Guaranteed Loan Program,” better known as USDA mortgages. Only rural and suburban homes qualify, as the program was created to attract new homebuyers to less populous areas of the country.

To qualify, you must earn less than 115% of the U.S. median income and prove that you’ve been unable to secure a conventional mortgage. Borrowers with high FICO® credit scores do not have to pay any down payment. If your credit score falls a bit lower on the FICO® scale, you may have to pay a down payment around 10% of your home’s value.

Good Neighbor Next Door Program

Pros – 50% flat discount on the home’s cost
Cons – Not available in most areas
– Not available to most professionals
Eligibility – Must be a police officer, firefighter, emergency medical technician or teacher
– Must agree to make the home your primary residence for at least three years
Best For – Emergency personnel and teachers with limited savings

More of a discount than a loan, the Good Neighbor Next Door Program rewards select public servants with a flat 50% reduction on their home’s sticker price. Participants are encouraged to finance the remaining half of their home with a conventional, VA or FHA mortgage, but they can also pay cash.

Your home must be located within a what the Department of Housing and Urban Development (HUD) designates as a “revitalization area” to qualify. You must also agree to live in the home for at least three years. So long as you stick around, you can sell the home and hold onto any profit once the three years are up.

Fannie Mae/Freddie Mac

Pros – Low down payment
– Multiple loan styles available
– No credit required for certain loans
Cons – May have higher interest rates than other federal programs
Eligibility – Must earn an income within location-specific requirements
Best For – Anyone that doesn’t qualify for other federal programs, but needs help paying the upfront costs of homeownership

Freddie Mac and Fannie Mae are government sponsored mortgage providers. While technically two different entities, they offer very similar programs for first-time homebuyers.

Freddie Mac offers Home Possible® mortgages with down payments as low as 3%. The Home Possible loan comes in 15- to 30-year fixed-rate and 5/5, 5/1, 7/1 and 10/1 adjustable-rate terms, along with cancellable private mortgage insurance. You also will not need any credit history for this loan.

The HomeReady® loan from Fannie Mae also requires down payments as low as 3%. All borrowers need a FICO® credit score of at least 620 to qualify, though. You must also earn an income at or near the U.S. median. With both Home Possible® and HomeReady® loans, you need to get private mortgage insurance by the time of purchase. Luckily, you can cancel it once you’ve accrued 20% equity in your new home.

NADL

Pros – No down payment
– Low credit scores accepted
– No private mortgage insurance
– Usually comes with lower closing costs
Cons – Not available in most areas
Eligibility – Must be a current or former military member of Native American descent, their spouse, or other beneficiary
– Home must be located in an eligible area
Best For – Native American veterans with limited income or savings

The Department of Veteran Affairs also insures Native American Direct Loans (NADL). They help Native American veterans secure a favorable loan. As with standard VA loans, you can buy a home  with 0% down payment. You’ll also have a set interest rate, which is currently 4.5%.

Veterans won’t even need an impressive credit record or private mortgage insurance to qualify. In an effort to cut down on the extra expense that closing costs can create, the VA has significantly lowered those as well. It’s important to remember that the home must be located on allotted lands, Alaska Native corporations, Pacific Island territories or federally-recognized trusts.

Maine First-Time Homebuyer Programs

Maine first-time home buyer programs

MaineHousing First Home Loan Program

Pros – Low interest rates
– Multiple loan styles available
– No down payment for certain loans
– Potential to combine with down payment and renovation assistance to save even more
Cons – Strict eligibility requirements
Eligibility – FICO® credit score of 640 or higher
– Income and purchase price limits dependent on home location and household size
Best For – Anyone with limited income and a decent credit score

MaineHousing provides 30-year, fixed rate mortgages through a statewide network of more than 40 banks, credit unions and mortgage companies to help make homeownership affordable for first-time buyers that have not held an ownership interest in your principal home within the past three years. A MaineHousing loan can be combined with an FHA, VA, USDA or conventional private mortgage.

Since there are many different options, there are a range of benefits. Some options require little or no down payment. Household and purchase price limits vary based on household size and home location, but most Maine households are income-eligible for the program and the majority of houses fall within the price limit.

As an added bonus, First Home Loan mortgages also come with payment protection. Known as Maine HOPE (HomeOwnership Protection for unEmployment), the program provides a junior mortgage lien worth up to four mortgage payments, including taxes and homeowner’s insurance, in the event you become unemployed. This additional loan doesn’t carry any interest or require monthly payments. However, you must pay it back if your mortgage is paid off, you sell your home or it is no longer is your primary residence.

MaineHousing Self-Insurance for Mobile Homes

Pros – No private mortgage insurance
– Potential to combine with down payment and renovation assistance to save even more
Cons – Borrowers with older homes must pay the loan back sooner
Eligibility – FICO® credit score of 640 or higher
– Must have 3% down payment
– Income limits dependent on home location and household size
– Homes must cost less than $150,000
Best For – Mobile home owners with limited income and a decent credit score

HousingMaine self-insures eligible mobile homes with a loan-to-value ratio between 80% and 95%. In exchange for paying slightly higher interest rates, Mobile Home Self-Insured (MHSI) homebuyers do not have to pay for private mortgage insurance. New mobile homes may qualify for a 30-year loan, but older homes must agree to shorter loan terms, which have the potential to result in higher monthly payments.

There are several eligibility requirements to consider. First, the only eligible property types are single-wide and double-wide mobile homes located on owned land, approved parks or privately leased lots. As with the First Home Loan program, income limits vary based on household size and home location. The purchase price limit of $150,000 applies statewide, though. Lastly, borrowers must contribute at least 3% of the purchase price from their own funds upfront.

Salute ME

Pros – Further 0.25% interest rate discount
– Low credit scores accepted
– Potential to combine with down payment and renovation assistance to save even more
Cons – Not available to most people
Eligibility – Must be a current or former military member, their spouse, or other beneficiary
– Income and purchase price limits dependent on home location and household size
Best For – Veterans participating in MaineHousing programs

To show appreciation for the commitment and sacrifices veterans make, MaineHousing offers an additional 0.25% discount on interest rates. These loans are available through the same network of lenders as a First Home mortgage.

As with a VA loan, Salute ME is only available to active military personnel or those that have been honorably discharged from service. It’s the most affordable way to obtain a home after returning to civilian life.

MaineHousing Advantage

Pros – Receive up to $3,500 to use toward down payment and closing costs
Cons – Must contribute 1% of the loan amount
Eligibility – Must be a MaineHousing program participant
– Must complete a homebuyer education class
Best For – Homebuyers taking advantage of MaineHousing programs who need more help to cover their down payment or closing costs

The MaineHousing Advantage down payment assistance program provides eligible MainHousing participants with $3,500 toward the upfront costs of homeownership. This is not a second loan and does not affect the interest rate on your mortgage. 

Borrowers must complete a hoMEworks-approved homebuyer education course to qualify. These courses are a great way to learn the responsibilities associated with a mortgage. At least 1% of the loan must be paid for as a down payment, but the cost of the homebuyer education class can count toward that contribution.

Purchase Plus Improvement Program

Pros – Receive between $500 and $35,000 for home repairs and updates
Cons – Must pay administration fee
Eligibility – Must be a MaineHousing program participant
– Income and purchase price limits dependent on home location and household size
Best For – Homebuyers taking advantage of MaineHousing programs who need more funds to update their homes

The Purchase Plus Improvement (PPI) program gives MaineHousing participants the chance to borrow up to an additional $35,000 for home improvements. Projects are eligible if they improve basic livability or safety, like adding a garage, updating heating and cooling systems or installing energy-conscious appliances. The funds will be tacked onto the original loan so it won’t add another burden.

Income limits are the same as the MainHousing First Home program, and the cost of the home plus improvements cannot exceed First Home program purchase price limits. The only downside is you must pay a 6% administration fee based on the loan amount (up to $375) to the mortgage insurer.

Tips for a New Mortgage

Maine first-time home buyer programs

  • Keep in mind that buying a home means closing costs and a down payment. Being a homeowner also mean paying homeowners insurance, property taxes and maintenance costs, on top of your base mortgage payments.
  • All of those additional costs can have a big impact on your budget and financial plan. If you don’t already work with an advisor, considering using our financial advisor matching tool to find an advisor to help you manage the transition to homeownership.

Photo credit: ©iStock.com/September15, ©iStock.com/lucky-photographer, ©iStock.com/Doucefleur

Liz Smith Liz Smith is a graduate of New York University and has been passionate about helping people make better financial decisions since her college days. Liz has been writing for SmartAsset for more than four years. Her areas of expertise include retirement, credit cards and savings. She also focuses on all money issues for millennials. Liz's articles have been featured across the web, including on AOL Finance, Business Insider and WNBC. The biggest personal finance mistake she sees people making: not contributing to retirement early in their careers.
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