Rent Vs. Buy a home in Portland Maine? Many ponder this question, and buying may be easier than you think. Let’s explore the process so that you can make an informed decision. First, Portland Maine has been dubbed a “foodie destination” “one of the hippest cities in America”, and “the little brother to Brooklyn NY”. With these titles comes demand and with that- high rents and lots of competition. Over the years the number of people “from away” has grown to more than 50% of Portland’s population. Many of these people come with higher paying jobs than the roughly $30k median income of the native Portlander. The rental market in Maine overall is a different animal than most are used to in cities such as New York or other big metro areas.
Most apartments are rented through word of mouth, Craigslist, possibly Zillow, and even Air BnB. When I moved here, I was very surprised to find out that our local MLS doesn’t list rentals. Some attribute this to the fact that most landlords don’t want to pay a fee and in Portland where the demand is through the roof, they don’t have to. Quite often, an apartment only has to be shown one day, and it’s got multiple bids.
On a side note, due to recent changes in law, as of January 1, 2016, anyone renting a room, apt, or any other portion of a home (including Air BnB) in Portland, will need to register as a landlord to ensure all safety codes have been met. You can register here.
Renters pay another person’s mortgage and own nothing. There are many affordable homes within Greater Portland and surrounding towns (Click here to search for listings) and with mortgage rates still hovering around 4%, homeownership could be more of a reality than you think. Two areas of concern for potential home buyers are the lack of cash for a sizable down payment and high property taxes. There are tax benefits for owning a home such as deducting mortgage interest and writing off property taxes. Your accountant will advise you on what you are entitled to.
There are loan products that cater to those who have challenged or less than perfect credit scores and small down payments. The Federal Housing Administration aka FHA for instance insures roughly 35% of all loans originated today. They allow for a minimum 3.5% down payment and allow for up to 6% financing of closing costs, but do have other premiums that can add up. Unlike conventional loan products the required PMI (Private Mortgage Insurance) for putting down less than, 20% stays with you for the life of the loan. Your loan officer can educate you on these important points and any other first time home buyer programs in Maine.
Keep in mind that going directly to a bank over a mortgage broker limits your options to what that particular bank offers. A mortgage broker will shop for the best loan product and rate for you. Do your homework before committing and make sure you are comfortable and FULLY understand what you are getting. One mistake many home buyers make is only relying on the expertise of a service provider and not completely understanding what they are signing or getting.
One last piece for buyers is to meet with a few real estate agents and choose one that you get along with, respect, educates, and truly has your best interest in mind. The key is education; any agent or service provider that takes the time to teach you and work with your timeline fully is worth your time.
If you decide buying isn’t an option for you right now and continue to rent, here are some tips to ensure you are a strong candidate:
- Plan ahead – know exactly what neighborhoods you want and can afford.
- Set aside at least three months worth of rent as a cushion. This way you won’t be surprised when the landlord requests first, last, and security just to secure the apt. If they don’t require all three, then you have a little extra cash to enjoy!
- Monitor your credit and check your report annually. It is important to note that the score you get from Transition, Experian, and Equifax is not necessarily the score a bank will use to pre-approve you for a mortgage. The banks go back into your credit history roughly ten years compared to the two by the three reporting bureaus. The banks also use the FICO algorithm which differs from what the others use. One reason you have three different scores is due to the difference in criteria they bureau’s use. Click here to read a post I wrote about credit and maintaining your score; it’s an education you shouldn’t miss.
- When you do find the apt of your dreams be ready to act fast, come with a pen and checkbook in hand. Prepare those that will become references for you to act quickly as well by taking the landlords call.
- Avoid using friends and family as references. We are all sure that they will only have nice things to say about you. Use a past landlord and professional reference. If you are just starting out and don’t have any professional or paste landlord experience then maybe you will have someone acting as a guarantor, and that should suffice.
- Lastly, know your limits. At times some people are willing to pay the year’s rent upfront or even more then the landlord is asking. In advance, think about what you are willing to do and not.
The key here is to have everything in order before viewing apartments so that you have the confidence you need to act fast and position yourself as a prime candidate.