Home Buying in Maine

Most realtors are pointing to Maine being a seller's market because properties are selling for more than the asking price. Peak season, which is May to August in Maine, speeds home sales up to about 25 days. In winter, it's not uncommon for homes to sit for 40 days or more before selling, and at this time of year, they often sell for less than the median value. Having a down payment saved and being prequalified for a mortgage allows you to move quickly when you find a good fit. A down payment of 20 percent is key, along with a good work history and a credit score of 600 or better. (It can be lower if you have a 20 percent downpayment saved.) Making prompt payments on debts improves your credit score, which is based on your payment history and your income-to-debt ratio.

Owners selling residential properties must fill out a seller's disclosure about the past and current condition of the site, inside and outside. It covers things like:

• The source of drinking water and what type of septic system it has
• Whether the property has been tested for lead paint, mold, or another toxin
• Details about access and easements, including any homeowner's associations

This seller's disclosure is just a starting point for buyers and their inspectors to evaluate the property. It's up to the buyer to determine the extent of any issues and calculate the potential costs of necessary repairs. The selling price of the property may be renegotiated if serious issues are found. The buyer's bid and down payment should be contingent upon the property passing inspection without significant issues. The buyer's mortgage company may also deny the purchase if significant issues appear on the property appraisal.

You can spend lots of time looking for the right home. Hiring a real estate buyer's agent can help narrow your search to a region that's a reasonable commute to work, within a good school district, and offers the lifestyle you desire. Hiring a buyer's agent can help you make the most efficient use of your time and, ultimately, the right investment in housing.

In addition, buyer's agents help negotiate the price using knowledge of comparable sales in the area. They may also know about homes about to go on the market, giving you a slight advantage.

A buyer's agent can provide background information on a home's price history, the area's pros and cons, and property taxes. They can also help find an inspector, renegotiate the price if there are issues, and keep the closing on track.

In the past, buyer's agents split the commission with the seller's realtor. Now, buyers must sign a contract with their buyer's agents that describes their role and payment.

Saving for a down payment and paying off debt can be the toughest parts of buying a home. However, the mortgage prequalification process, which determines how much home you can afford, can teach you a great deal.

Ask at your local bank, as well as mortgage brokers, to find a mortgage with good terms (interest rate, required PMI). Your everyday bank may extend special benefits to existing customers. Mortgage brokers have access to a wide variety of options, so you'll want to consult one, too.

It can take time to prequalify for a mortgage. Standards are high: your credit score must be at or above 640, and your income-to-debt ratio and history of on-time payments must be good. Consider getting free copies of your credit report (from Experian, Equifax, and TransUnion) to correct any errors that could delay an application.

If the seller has a low-interest-rate mortgage, you may want to a ssume the seller's mortgage. This may allow you to take over the current owner's mortgage, which can have a much lower rate than is currently offered. Most government-backed USDA, FHA, and VA loans are assumable if you qualify. In this situation, you have to pay off the owner's equity, which is the difference between the amount left on the mortgage and the property's selling price. To do this, you're likely to need a second mortgage.

When interest rates are high (rates rise and fall incrementally over periods of years), fixed-rate mortgages are less desirable. Adjustable-rate mortgages can be risky because the interest rate can change during the loan's term. Jumbo loans are allowed in specific areas of the country where home prices are high, and mortgages of $760,000 to $1 million are required.

Mortgage options include these government programs:

• First-time home buyers may qualify for low-interest loans through Maine Housing.
• FHA mortgages are tailored for first-time buyers with down payments of less than 5 percent.
• Rural properties may qualify for USDA loans, especially buyers with low incomes but good credit scores.
• Military veterans and their surviving spouses may seek a Veterans Administration-underwritten VA loan. These mortgages do not require PMI and may be used multiple times by qualifying individuals.

Do you need home insurance? Maine experiences some severe weather events, such as ocean storms, deep snow, and freezing temperatures. Homeowners in Maine pay far less for property insurance than others across the country: just over $1,000 per year. The national average is $1,900 per year. Other states that experience frequent storms, like Oklahoma, pay as much as $5,000 for the same amount of coverage.

Maine property insurance is not required. Mortgage companies often require PMI, a type of insurance, to protect their interest in the property. PMI is required when your down payment is less than 20 percent. The cost is generally between $400 and $1,400 per month in addition to your mortgage payment but varies according to your credit score.

Understand your policy to ensure important features of your property are covered. Usually, a shed, garage, or fence must be specifically listed for insurance. Appliances and personal possessions inside the home may not be covered by insurance unless they're included on an additional rider.

Beware of home building contractors in Maine: the state does not require them to be licensed or bonded. Proceed cautiously if you purchase a home that needs repair or that you want to renovate.

In other states, consumers are protected by a statewide licensure requirement that can be examined as proof the contractor is aware of safety and construction standards. In Maine, there is no safety net other than the property owner's knowledge of consumer protection laws and due diligence. The state recently passed a law that says any contract for home improvements or renovations valued at more than $3,000 should be in writing and the property owner does not pay more than one-third of the cost before the job is finished.

The state attorney general recommends homeowners follow these steps when hiring a contractor:

• Get recommendations from several past customers
• Check the contractor's paperwork to make sure their liability insurance is up to date
• Get proof of worker's compensation insurance
• Talk to architects and other building professionals who have worked with them.