Taking a homebuyer education class and determining your financial goals are the first steps in making your path to homeownership a success.
A homebuyer education class will explain how the buying process works and the importance of credit and debt management and budgeting and help you choose the mortgage option that is best for you. Homebuyer education also gives buyers the tools they need to avoid predatory lending and possible foreclosure.
hoMEworks homebuyer classes are offered in person at several convenient locations statewide and online. You can find out more about class start dates and their locations on the Maine hoMEworks website, https://www.mainehomeworks.org.
A hoMEworks approved homebuyer education class is required to receive the $5,000 Advantage down payment and closing cost assistance grant offered with MaineHousing’s standard First Home Loan.
Being able to buy a home is more than just affording the monthly mortgage payment. Several factors such as mortgage insurance, homeowners insurance, and property taxes must also be considered and should be included in a budget you create based on your income and other reoccurring expenses that also leave a cushion for unexpected costs and to save for vacations and other enjoyable activities.
A MaineHousing lender partner will review your income, debts, and expenses with you to determine how much you are qualified to borrow which will help establish the price range of the home you should be looking for. Using a mortgage calculator or a rent vs buy comparison to determine if buying a home is the right choice for you.
Your credit score is based upon information that appears on your credit report. It is important that you review the information in your credit report to be sure it is accurate before visiting a lender. A lower credit score could mean additional fees or a higher interest rate, resulting in a higher monthly payment.
To request a free copy of your credit report:
If there is any inaccurate or incomplete information in your report, write to the credit reporting company and tell them what information you think is inaccurate. For more information about how to dispute errors, visit the Consumer Federal Trade Commission website.
MaineHousing’s First Home Program requires a minimum credit score of 640.
Contact a First Home Lender for a loan pre-approval to confirm how much you can afford through MaineHousing’s First Home Loan program.. For buyers having less than a 20% down payment, a MaineHousing mortgage may be combined with a government guaranty (FHA/RD/ VA) or with a MaineHousing-approved private mortgage insurance company, where little or no down payment is required. A MaineHousing lender partner will help you find the best loan guaranty or mortgage insurance option for you.
The lender can guide you through the various program options available with MaineHousing’s First Home Loan to find the one that best fits your needs. First Home Loan options are available for the purchase of single-family homes, 2-4 unit homes, condos, and manufactured homes. Be sure to explore MaineHousing’s Advantage down payment and closing cost assistance grant option with your lender. The grant amount and education requirement can vary by program option
Once you are pre-approved, the lender will provide you with a cost estimate that will help you understand the full cost of the mortgage, including fees and interest. Keep this information in mind as you search for a home and when making an offer to purchase one that you want to buy.
When shopping for a home, keep your needs and wants in mind, take notes, and ask questions. For most homebuyers, an important step toward buying a home is connecting with an experienced real estate professional who is familiar with the town or area in which you want to live. Consider working with one of MaineHousing’s First Home Finders , who are real estate professionals who have sold three or more homes that were purchased by buyers using the First Home Loan program in the previous year.
You’ve found the home of your dreams and are ready to make an offer, but how does that process work and what do I do if it’s accepted?
Make An Offer
Once you’ve found the house you would like to buy, the real estate professional you have been working with will assist you with drafting the terms of an offer, which is a written proposal that is presented to the owner of the property. Once the offer is accepted and signed it is referred to as a Purchase & Sale Agreement. Working closely with your real estate professional, the terms of the Purchase & Sale Agreement will assure that you’ve addressed the many important details of the process leading up to the closing when the home actually becomes yours. The Purchase & Sale Agreement will state the amount of the down payment, the total loan amount, and the financing terms you will be applying for, as well as any conditions or inspections you wish to have included plus the timeframe within which the closing will take place.
Obtain A Home Inspection
Regardless of the age of the home you are buying, and no matter how well maintained it appears to be, it’s important to include a “satisfactory home inspection” contingency in your offer to purchase. The inclusion of this clause enables you to hire a home inspector for the purpose of doing a thorough structural and mechanical inspection of the home. Remember that there may also be underground utilities such as a well or septic system serving the home in rural areas and underground sewer, gas, and electrical lines in more urban areas that should be examined or tested whenever possible. You may also want to consider water and air quality tests that could reveal any potential issues with contaminants such as bacteria, radon, and lead.
Unsure of where to find a home inspector? Home inspectors are not licensed, but many are certified which means they have passed an exam and have agreed to abide by standards of practice. There are three organizations that certify home inspectors:
Real Estate professionals have typically worked with a variety of qualified home inspectors and may be able to suggest a reputable contact to examine the home you hope to buy. If you’re looking for a real estate professional, check out the list of MaineHousing’s First Home Finders .
Obtain Homeowner's Insurance
Mortgage lenders require borrowers to carry enough homeowner’s insurance, also called hazard insurance, to cover the replacement or repair costs of damage to the home’s structure. Homeowner’s Insurance provides financial protection in the event that your home or its contents are damaged and also provides protection if you or a family member are held legally responsible (liable) for injuries to others or damage to their property.
Prior to closing, your lender will require that you have paid the first-year homeowner’s insurance premium upfront. After closing, your lender may include insurance premiums and property taxes in your monthly payment and hold the funds in an escrow account until the bills for each are due to be paid.
The Bureau of Consumer Credit Protections’ publication “A Consumer’s Guide to Homeowners Insurance” is an excellent resource for first-time homebuyers.
The location of your house may require additional insurance coverage, such as flood insurance, to be purchased prior to your loan closing.
Owner’s Title Insurance Policy
The owner's title insurance called an Owner’s Policy, insures against any unforeseen problems should an issue with the title arise that was not discovered during the title search and results in financial loss.
The lender will arrange for a title search to determine whether or not the property has a clear title. Having a clear title means that there are no known liens or claims against the property which could affect your interest in the property. A title search will determine the history of ownership and whether there are any liens, claims, or unpaid taxes.
A lender will purchase a title insurance policy to protect the lender’s interest in the property. However, should a problem with the title arise after closing it does not protect the buyer, cover the owner's equity in the property, or pay the homeowner's legal expenses. For this reason, it is highly recommended that a buyer obtain an Owner’s Policy.
For more information, visit the Consumer Financial Protection Bureau (CFPB) website .
Closing day is when the seller receives their payment and you receive the deed and keys to your new home! At the closing, you will be required to sign legal documents for the loan and transfer of property. You will also need to pay any applicable closing costs, escrow items, and down payment.
Three days before the loan closing you will have an opportunity to review the final estimate of closing costs called a Closing Disclosure. The Closing Disclosure is a document that provides final details about the mortgage loan you have selected including the loan terms, your projected monthly payments, and how much you will pay in fees and other closing costs. It is recommended that you compare the Closing Disclosure information to the Loan Estimate, which the lender provided just after you applied for the loan. The Loan Estimate will help you understand the full cost of the mortgage, including fees and interest.
You have the right to request a walk-through inspection of the property 24 hours before closing. This walk-through is an opportunity to ensure that the seller has vacated the property and left it in an acceptable condition with all included appliances along with any other negotiated items that were to be included in the sale as agreed.
Every step you take now to care for your home will benefit you and your family in the future. It is important that you maintain the condition of your home for safety and comfort and to protect the value of your property. Maintaining your property requires both time and money. When it comes to budgeting for annual home maintenance, a general rule of thumb is to set aside one percent of the price you paid for your home.
If you are a homeowner whose drinking water comes from a private well, Maine’s Division of Environmental Health recommends testing your water once a year for bacteria and nitrates and every 3 to 5 years for contaminants such as arsenic, uranium, radon, and lead. Visit the Maine Division of Environmental Health website for a list of water testing laboratories.
Establish an Emergency Fund
An emergency fund can help you prepare for life’s unexpected events, such as a job loss, health issue, or large home or auto repairs. An emergency fund should cover at least 3 to 6 months' worth of living expenses, including the most common expenses such as, mortgage payment, utility bills, food costs, health insurance, student loans, car payments and car insurance. You can build your emergency fund by putting away small amounts on a regular basis, every week or with each paycheck.
Create A Budget
If you are looking for a tool to help establish your budget based on actual expenses as a new homeowner, Mint is a free, secure online tool that allows you to download all your financial information from your bank and then track and categorize your spending. Mint will create a budget for you based on your spending habits. https://www.mint.com/budgeting-3/home-budget-template-create-an-effective-household-budget .
Other online money management tools can be found at:
Make Your Home Energy Efficient
Consider making your home more energy efficient. After your mortgage payment, your monthly heating and utility bills are usually your next largest housing-related expenses. A home performance evaluation, or energy audit, is one way to determine where heat may be leaking out of your home. Investing in energy-efficient improvements will decrease the money you spend on energy bills, increase the money you have for savings or home maintenance, increase the resale value of your home, and make your home more comfortable.
If you are interested in a resource for homeowners hoping to make their homes more energy efficient, visit the Efficiency Maine website .
Managing Financial Difficulties: Should you encounter a financial issue or a hardship that prevents you from making your mortgage payment, or you have not yet been late on your payments, but are worried that it could happen, make a call for help right away. Visit our Mortgage Help section for more info.