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The Top 10 Tips for Duplex & Multifamily Home Buyers in Maine

Vacationland, the way life should be, open for business — Maine is many things to many people. As varied as its slogan, the Pine Tree State offers an abundance of multifamily living options everywhere you look: Historic Victorian homes complete with a widow’s walk. Triple decker apartment buildings with quaint views of the Main Street. Renovated farmhouses on acres of land. This state is your oyster (or lobster, if you prefer).

Shopping for a duplex or other multifamily property in Maine comes with a few unique considerations, from financing options to the day-to-day responsibilities of being a multifamily home owner. Here are our top 10 tips to help you in your search.

1. Know what qualifies as a multifamily property in Maine.
There are plenty of apartment buildings and other multifamily properties available in Maine, both in the cities and in more rural areas. A multifamily home is defined as a residential building in which two to four families or tenants can live separately. To qualify for a multifamily mortgage loan, each unit of the property must have its own kitchen, bathroom, entrance/exit (usually) and address or unit number.

2. Explore all your multifamily loan options.
Loan programs designed to assist first time home buyers are available in all 50 states, including FHA, VA and conventional loans. Since rural land is abundant in Maine, USDA loans are also common. These loan options require as little as 0%-3%  down, but each comes with their own set of requirements. MaineHousing’s First Home loan program helps first time home buyers by offering low down payments, cash assistance at closing, low fixed interest rates and financing for mobile homes; it can also be combined with another loan type.

3. Property types vary greatly in Maine.
Though over 60% of its population lives in its handful of urban centers, Maine is considered a largely rural state. Rural properties tend to include more acreage, which can increase the sale price, and with it your mortgage; buyers are more often eligible for USDA and VA loans in this case.

4. Keep an eye on your savings.
Depending on the type of loan you choose, you may need anywhere from three to six months’ worth of mortgage payments in savings to qualify. These reserves must be liquid cash — non-monetary assets like your car or other properties do not count. Besides your closing costs and fees, you will need to prove you have enough funds left over to put your mortgage lender at ease in case of a loss of income.

5. Make sure you know which income you can use to qualify for a loan.
You may have heard that you can count rental income — current and projected — toward a loan application. While this is generally true, there’s some fine print. If applying for an FHA or conventional loan, you may count 75% of your rental income from either a current or future property, provided the income is properly documented and adjusted for market rent rates. Prospective borrowers can claim rental income to qualify for a VA loan, but must provide proof of cash reserves and two years’ worth of rental income documentation.

6. Remember that Maine is a title state.
No need to pay steep legal fees — a notary may preside over a closing in place of an attorney in Maine, which can help lower the overall closing costs.

7. It helps to be handy (or know someone who is).
First settled by colonizers in 1604, Maine is home to some beautiful historic buildings, not to mention temperamental New England weather. In addition to standard home maintenance and repairs, multifamily homeowners in Maine may need access to contractors who specialize in historic homes (and their charismatic heating and plumbing systems). Snow plowing is a necessity when owning a home in Maine; fortunately, Maine is full of businesses and individuals who specialize in snow removal.

8. Beware of lead paint.
Now known to cause major health issues, lead was a standard ingredient of interior house paint prior to 1978. Much of the lead paint in Maine homes has been identified and removed, but Maine state law requires landlords to disclose the presence of lead paint to tenants or buyers. Lead can cause serious damage to internal organs and children’s development, so any potential lead paint issues will need to be addressed following the home inspection.

9. Decide what kind of borrower you will be.
Although most multifamily loan options require that the borrower live onsite for at least one year, there are above-board loopholes. If someone’s income or credit profile are not strong enough to qualify for a mortgage on their own, a non-occupying co-borrower can help them qualify. The co-borrower (you, if that’s the case) does not have to live onsite, but their credit profile and income are factored into the qualification equation.

10. Plan for your (and your home’s) future.
If living the multifamily life isn’t part of your long-term plan, don’t feel stuck: Multifamily homeowners have the option to live onsite for the duration of their loan terms, then move out and turn the house into an investment property. But even as a remote landlord, the owner is still responsible for managing all repairs, maintenance and utilities for the property.

No matter where you’re looking to put down roots in the Pine Tree State, Blue Water Mortgage can answer all your questions about multifamily mortgages in Maine.

Roger is an owner and licensed Loan Officer at the Blue Water Mortgage office in Hampton, NH. Roger graduated from the University of New Hampshire Whittemore School of Business and has been in the mortgage industry for over 15 years. Roger has originated over 1500 residential loans and is licensed in New Hampshire, Massachusetts, Maine, Connecticut and Florida.