FHA loans are a popular financing option among home buyers in Portland, Oregon, mainly because they allow for a down payment of 3.5%. That’s a smaller investment requirement than most conventional home loans.
But is it the right program for you? Should you use an FHA loan to buy a house in Portland in 2017? That’s the topic of today’s blog entry.
The Federal Housing Administration (FHA) mortgage loan program has been helping borrowers purchase homes for decades. This popular program allows borrowers to finance up to 96.5% of the purchase price, for a down payment as well as 3.5%.
Here are some things you should know about buying a home in Portland with an FHA home loan. The following information has been fully updated for 2017.
Using an FHA Loan to Buy a Home in Portland
FHA home loans are ensured by the federal government, under the management of the Department of Housing and Urban Development (HUD). This government backing allows lenders to be a bit more flexible with FHA loans, compared to conventional mortgages that are not insured by the government.
FHA loans require a minimum investment of 3.5% of the purchase price or the appraised value, whichever is less. This means home buyers who used the program can finance up to 96.5% of their purchase. This relatively small upfront investment increases access to mortgage financing, particularly among those who can’t afford a larger down payment.
FHA loans are one of the most popular financing options among first-time home buyers in Portland, Oregon — mainly for the two reasons listed above. But the program is not limited to first-time buyers. Even those who have owned homes in the past can use an FHA-insured mortgage loan to buy a house in Portland.
How Loan Limits Compare to House Values in 2017
Like many mortgage programs, FHA loans have maximum size limits. These limits vary from one county to the next, because they are primarily based on median home prices. In the Portland metro area, a 2017 FHA loan limit for a single-family home is $408,250.
Federal Housing Administration loan limits for the Portland area are slightly higher than the median home price, as of July 2017. So in theory, home buyers who use this program should have plenty of houses to choose from without exceeding the maximum size limit.
In reality, though, there is currently a shortage of homes for sale in Portland, which makes things a bit more challenging for all home buyers – regardless of what type of mortgage loan they use.
According to the real estate brokerage Redfin, the Portland housing market was down to a meager 1.4 months of supply in May 2017. Houses are selling quickly as a result. In May, homes listed for sale spent a median of just 8 days on the market, before going under contract. That means offers are coming in fast, especially for desirable homes in sought-after neighborhoods.
The Benefits of Getting Pre-Approved
If you’re planning to use an FHA loan to buy a house in Portland, it would be wise to have your financing lined up before you enter the market.
It’s an active, competitive real estate market in 2017, and this will likely carry over into 2018. So home buyers should have their ducks in a row before taking the plunge.
One of the things you can do to improve your chances of success is to get pre-approved for a home loan. This can give you a much-needed advantage in the market, because it shows sellers you’re serious about buying. This is true for FHA loans as well as conventional mortgage financing.
Mortgage Insurance for FHA Loans
Most Portland home buyers who use FHA loans will have to pay mortgage insurance. The Federal Housing Administration actually requires two kinds of mortgage insurance with this loan program.
- There is an upfront premium that usually comes to 1.75% of the loan amount.
- Additionally, most borrowers have to pay an annual mortgage insurance premium that typically equals 0.85% of the amount borrowed.
For many Portland buyers, the low down payment and flexible qualification criteria are more than enough to outweigh the downside of paying mortgage insurance. But this is a personal choice you’ll have to explore further, based on your financial goals and housing needs.