From Aroostook to York, Maine is the place to be! If you’re looking to buy a home in Maine, you’re not alone; but, like many others, you’ll need a mortgage. Here’s a quick list to help first-time home buyers get the mortgage that works best for them.
Of all the mortgages you can pick from, this is the most common. Your grandparents probably had one, as did your parents. A fixed-rate mortgage is easy to understand: You pick a time frame to pay back the loan, normally between 15 and 30 years (though some are as short as five years), and your interest rate stays the same throughout. This type of mortgage is stable, and comes with no surprises for first-time home buyers. The only drawback is that you might not get the best deal on the interest rate. So if mortgage rates drop, your payments won’t. On the other hand, if they suddenly rise – you’re safe.
If you have a nest egg and can pay your mortgage off quickly (think less than five years) or don’t plan on living in the home you’re purchasing for long, an adjustable-rate mortgage (ARM) is an option to consider. ARM interest rates are typically based on annual treasury bills. They usually start off low and increase throughout the life of the loan. A disadvantage of taking out an ARM is that it just might cost you one – and a leg, too. Untrustworthy third parties could take advantage of first-time homebuyers’ enthusiasm by presenting misleading numbers about things such as margin caps or adjustment indexes, which is why ARMs are usually only a good option for those who move quite a bit.
Government Secured Loans & FHA
The caveat is in the name: Federal Housing Allowances come from the federal government, so there are many restrictions on how home buyers can use them – namely spending caps. The price limit normally rests in the middle of what you can except to pay for a home in a specific city, so for example, the prices in Portland and Augusta would be different. That said, these mortgages are easier to qualify for, and usually require as little as 3.5 percent of the purchase price for down payment. Maine offers a unique alternative via the Maine State Housing Association (MSHA for short). The state agency is a favorite of first-time home buyers, and aims to bridge the gap between public and private housing for Mainers. If you want to live in a rural area, then a RD (Rural Development Loan) may be right for you. RDs are an excellent option, because they require no money down at signing. Finally, if you or your spouse served in the Armed Forces, the Department of Veterans Affairs offers mortgage assistance.