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Benefits of FHA Loans for First-Time Home Buyers in Oregon

Summary: If you’re ready to buy a home in Oregon, you have many mortgage options to choose from, including FHA loans. This is a great option for first-time homebuyers, and this article will explain why.

The Federal Housing Administration (FHA) loan program is one of the most popular financing options for first-time home buyers in Oregon. These loans are not limited to first-time buyers, but they are often well suited to this audience due to the low down payment and other factors.

FHA loans offer more flexible lending criteria, which is especially helpful for first-time homebuyers who do not have the proceeds of a previous sale to put towards a new home purchase. These loan types are easier to secure because of their lower credit score and down payment requirements, making them an ideal choice for first-time buyers and anyone else who may otherwise have a tough time getting approved for a conventional loan.

Today, we will look at how FHA loans can benefit home buyers in Oregon.

What Is an FHA Loan?

FHA home loans are insured by the government, through the Federal Housing Administration (part of HUD). The full name of the program is the HUD 203(b) Mortgage Insurance Program. But they’re more commonly referred to as “FHA loans.”

In many ways, they are similar to any other type of mortgage loan. But it’s the government backing that makes them unique. A “conventional” mortgage, in contrast, is not insured or guaranteed by the federal government.

FHA loans are designed for borrowers who are classified as having low-to-moderate income as well as lower-than-average credit scores. While the government insures these types of loans, they don’t actually offer them. Instead, FHA loans are provided by FHA-approved mortgage lenders. These loan types come in 15-year and 30-year fixed-rate terms.

How Does the Program Work?

As already mentioned, the FHA does not lend money directly to borrowers. They simply insure the loans made by mortgage lenders in the private sector. So the first step is to apply for a loan through a mortgage company that has been approved to participate in the program (like us).

When home buyers in Oregon apply for an FHA loan, they go through a screening process that’s very similar to conventional or “regular” home loans. The lender will review your income, employment situation, debt-to-income ratio, and credit score (among other things). They will also have the home appraised to ensure it meets HUD’s minimum property guidelines.

Live Oregon Mortgage Rates Aug, 07, Fri, 2020

Advantages for First-Time Home Buyers in Oregon

First-time home buyers in Oregon can benefit from using FHA loans. Two of the biggest advantages are the relatively small down payment and flexible guidelines associated with this program.

  • Oregon home buyers who use an FHA loan to buy a house can make a down payment as low as 3.5%.
  • Borrowers with credit problems in the past may find it easier to qualify for this program, compared to a conventional mortgage. The minimum credit score required to secure an FHA loan with a low down payment is 580.

Learn more about FHA down payments.

There are other benefits as well. For instance, borrowers who refinance their homes later on can take advantage of the FHA “streamline” refinance. As its name implies, a streamline refinance loan is designed to simplify the refinancing process. In fact, it can be completed without a property appraisal, which is typically required for a refinance loan.

A Word About Mortgage Insurance

Like private mortgage insurance (or PMI, which is required on non-government-backed loans with less than a 20% down payment), FHA loans require mortgage insurance. This policy is designed to protect the lender in case you default on the mortgage.

FHA borrowers must pay two FHA mortgage insurance premiums: one upfront when the mortgage closes (which can be financed into the loan amount), and another annually for the duration of the loan (which is included in your monthly mortgage payment).

The upfront premium is equal to 1.75% of the loan amount, while the annual premiums are equal to 0.45% to 1.05% of the loan amount every year of the loan term.

You Have Other Mortgage Options Too

Many first-time home buyers in Oregon use FHA loans to buy a house, for the reasons explained above. But you have many other mortgage options to choose from as well.

For instance, some borrowers use conventional (non-FHA) home loans with a down payment of 20% or more, in order to avoid paying mortgage insurance. Military members and veterans can benefit from the VA loan program, which offers 100% financing.

Additionally, there are differences with the rate structure. Oregon first-time home buyers can choose between a fixed-rate loan and one with an adjustable rate that changes over time.

Learn more about your Oregon mortgage loan options.

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Looking to Apply For an FHA in Oregon?

If you want to buy a home in Oregon and are considering an FHA loan to finance this purchase, you’ll want to team up with the experts in mortgages. At Sammamish Mortgage, we offer many mortgage programs for borrowers in Washington, Oregon, Idaho, and Colorado, including FHA loans. We’d love to help. Get in touch with Sammamish Mortgage today to apply for a home loan or to have any questions answered.

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