Conventional, First Time Buyer and FHA Home Loans in Maine

Buying a home is an exciting time and we’re glad to help compare the two most common first-time buyer loan options in Maine!

Below we’ll discuss first-time home buyer options in Maine, as well as focus on the Conventinoal Loan and FHA Loan in Maine. Both are some of the best programs in the country and will give you great options to buy a home.

For any home-buyer, the first few steps to buying a home include determining if you’re ready to buy a home and then getting pre-approved for a mortgage. Make sure to check out those articles after you’re done reading here.

Maine FHA Loan Program

The FHA loan is the original (and premier) first-time home buyer program in the country. The program itself was created to make affordable housing options across the nation during the Great Depression.

FHA loans have the most competitive interest rates, a low down payment, flexible Debt-to-Income ratio requirements and low mortgage insurance, making it one of the best loan options borrowers in Maine have available.

Maine FHA loans have several key benefits:

• Low Down Payment – the FHA loan requires a 3.5% down payment
• Low Interest Rates – FHA loans in Maine have lower interest rates than Conventional loans in most instances.
• No Income Limits – there are no income limits on an FHA loan
• Higher Loan Amounts – for a 1-unit property, a borrower can finance up to $351,000 in York and Cumberland Counties. All other counties are capped at $314,827.  
• Flexible Credit Scores – the FHA loan is best known for having the most flexible credit score requirements. Ideally, scores need to be above 620, but in many instances, you may be able to qualify with scores down to 580.
• Affordable Mortgage Insurance – FHA loans calculate their monthly mortgage insurance based solely on the loan amount, whereas Conventional loans use risk-based pricing meaning that PMI rates are based on your down payment and your credit score. So borrowers with lower down payments and lower credit scores (under 720) pay higher mortgage insurance on Conventional loans than an FHA loan.
• Flexible Debt-to-Income – Rural Housing Loans (capped at 43%) and Conventional loans (capped at 50%) have very strict debt ratio requirements. FHA loans are the most lenient, allowing a borrower to have 57% of their gross income allocated towards a mortgage payment and minimum debt payments.
• Excellent for 2-4 Unit Properties – if you’re wanting to buy a multi-unit home (assuming you plan to live in one of the units), the FHA loan is ideal. Conventional loans increase the down payment requirement the more units in the home (Conventional loans require 20% down for a 4-unit property), but FHA loans keep it at the minimum of 3.5% down assuming it’s under the county loan limits. Loan limits vary based on number of units. Please contact one of our loan officers for more information.

If you're interested in applying for an FHA Loan Online, you can click on that article to learn more about the benefits of that and working with our company.

First-Time Home Buyer Loan Options in Maine

The FHA loan program mentioned above is certainly the most common loan that first-time buyers in Maine due to the low down payment, competitive rates and the fact that it has no income limit or property location requirements (like the USDA loan). However, there are a few other great options if you're able to qualify.

USDA Loan

If you're buying in an eligible rural area and can meet the income limits, USDA credit score requirements and debt-to-income ratio requirements, then the USDA Loan is far-and-away the best option most first-time buyers can use. 

If you want to see if you're eligible, take a few minutes and apply for a USDA Loan online. 

Primary benefits of the USDA loan are:

• No Money Down - Maine first-time buyers are not required to put any money down in most instances when applying for a USDA loan.
• Low Interest rates – At United Fidelity Funding, we offer some of the more competitive rates in the nation, but on top of that USDA Loans in Maine have some of the lowest rates of all which allows your payment to be more affordable.
• Reduced Mortgage Insurance – the USDA Mortgage Insurance premium is the lowest of any loan program, calculated at .35% of the loan amount per year, which is then divided by 12 to determine the monthly installment added to your mortgage payment.

USDA Requirements in Maine:

• Income limitations - household income cannot exceed $82,700/year in most areas with the exception Portland and York which can go up to $103,000.
• Debt-to-Income - the housing payment cannot exceed 31% of the borrowers income and total debts (including the new house payment) cannot exceed 43% of the income.
• Credit Score - borrowers generally need a minimum mortgage credit score of 640 to qualify, but there are some instances where lower scores may be eligible. 
• Property Requirements - not only does the home have to be in eligible areas, but the land cannot be income-producing (i.e. farms) and must be your primary residence.

Conventional First-Time Buyer Options

Conventional loans offer two separate first time home buyer options for borrowers in Maine.

Conventional 3% Down (First Time Buyer Only)

The Conventional 97 Loan, or the ‘standard’ 3% down conventional loan, is a program specifically for first time buyers. Other than the 3% down payment requirement (as opposed to the traditional 5% down requirement), there are no other significant differences between this loan and the standard conventional loan. Read our overview of Conventional Mortgages for more information.

HomeReady First Time Home Buyer Maine

Fannie Mae’s HomeReady program is the better of the two Conventional loan options, and ideal for first-time buyers, however any borrower can use a HomeReady loan if they qualify (first, second, third-time buying, etc.).

The key benefits to this program is that not only does it allow a reduced down payment (3% as opposed to 5%), but it also offers reduced interest rates and mortgage insurance compared to the traditional Conventional loan.

Since this HomeReady program was intended to help low-to-moderate income households, there are income limitations. Be sure to read our first-time home buyer loan option breakdown for more details.

This program offers higher county lending limits than FHA Loans in Maine. The Conventional Loan limit in Maine is $484,350 on 1-unit properties.

FHA Loan & First Time Home Buyer Loan Requirements

The FHA loan and first-time buyer loan options in Maine have different requirements that you do need to be aware of. Below is a quick overview but once you’re ready to see if you qualify, give us a call or apply online and we’ll be glad to help you determine if you qualify.

Maine State Housing Program

We’re not going to review this program in great depth, but one option some first time buyers have is the Maine State Housing home loan assistance program. This program is marketed a lot and does meet a lot of first time buyers needs in Maine, but it is much more restrictive then the FHA loan and First-Time Buyer Options we highlighted above.

Maine State Housing Benefits:

• Down Payment & Closing Cost Assistance – the Maine State Housing First time home buyer program does offer $3,500 towards down payments and closing costs if you qualify.
• Can be coupled with any program (assuming you meet the extra requirements) – the Maine State Housing Advantage program offers you the down payment assistance mentioned above which be applied to an FHA, USDA, VA or Conventional loan. The program doesn’t abide by the traditional/national loan requirements for those programs though, which make it a little tricky to understand. Essentially, there is no such thing as a “Maine State Housing Loan” or a “Maine First Time Home Buyer Loan”, it’s basically a grant that helps give you a little extra cash to go towards a loan program you qualify for. The lender also agrees to offer rates at pre-determined percentages which are set by the Maine Housing Authority.

Maine State Housing Negatives:

• Income limitations – most national programs don’t have income limits, but there are to qualify for the Maine Advantage program. In Cumberland and York County a 2-person household can’t make more than $90,000 annually. Most other counties are capped at $70,000/year.
• Loan Limits – on a single-family home, Maine state housing restricts the loan amount to no more than $303,000 in most counties including Cumberland and York, while all other counties are capped at $271,000.
• Interest Rates – the program markets it’s ‘low interest rates’ but that’s not 100% true. The Maine State Housing rates are in line with traditional/national FHA, VA and USDA interest rates, so there’s no real advantage there. The one advantage is if you qualify for the Conventional 5% down option, then their rates are advantageous and much lower than traditional Conventional loans.
• Credit Score Limitation – in order to qualify for the first time buyer Maine program, you must have a minimum credit score of 640.
• Federal Tax if You Sell Your Home – if you obtain a Maine state housing first-time buyer loan, then sell your home for a profit, and your income has increased more than 5%/year, the IRS will charge you a recapture tax. You will have to pay this tax upfront, but Maine state housing will reimburse you if you submit the required forms.

For some first-time home buyers, the Maine State Housing program is a great choice but it’s not for everybody. If you meet the income, loan limit and credit score requirements, then it is something to consider as a financing option. For more information on their program visit https://www.mainehousing.org/.

Maine First Time Buyer & FHA Loan Option Summary

While our team lends throughout many states in the U.S., one of our primary branch locations is based in Scarborough, Maine. We employ several "Mainers" and would love the chance to serve you regardless if you're a first time buyer, or looking to utilize the FHA loan, VA, USDA or Jumbo loan.

Once you’re ready to see if you qualify, fill out one of the contact forms on our website, apply online, or call or email us! Our team is here to help and we’re one of the top lenders in Maine!