It’s one of the most common questions among home buyers in Oregon: How much house can I afford to buy, when using a mortgage loan? And with the steady rise in home prices over the last couple of years, we thought it was time for an updated look at this topic. Here’s how to figure out how much house you can afford in Oregon, if you’re buying in 2018.
Oregon Home Prices Expected to Rise Into 2018
Let’s start with current home-price trends in Oregon. According to data collected by Zillow, the median home value for Oregon was $314,400 in October 2017 (when this article was published). That was 9.5% than the same month a year earlier. The company’s economists expect house values in Oregon to continue rising throughout 2018 as well, though they’re predicting smaller gains.
According to Josh Lehner, an economist at the Oregon Office of Economic Analysis: “There’s no question housing prices [in the state] have been going up and continue to go up.”
So that’s the first thing you should know. Prices have risen considerably over the last couple of years. This will partly determine how much house you can buy in Oregon, within your budget.
Before entering the real estate market, spend some time looking at recent sales prices in the area(s) where you want to buy a home. This is the best indicator of how much house you can buy, based on current market conditions. It will also help you create a strong offer when the time comes.
Down Payment Considerations
Down payment amounts are based on the price of the home. So a pricier house could mean you’ll have to put more money down. This too will determine how much house you can buy in Oregon.
When it comes to the minimum down payment needed to buy a home in Oregon, misconceptions abound. Surveys have shown that there’s a lot of confusion over this subject, including the notion that all buyers need 20% down.
The truth is there’s a lot of flexibility when it comes to the down payment requirements for mortgage loans. Your minimum required investment could be as low as 3%, depending on the type of loan you use. FHA requires an investment of 3.5% of the purchase price. And with a VA loan, it’s possible to finance the entire purchase price.
You could even use gift money from a family member, to cover some of your upfront investment.
The down payment is a primary consideration, when figuring out how much house you can afford to buy in Oregon. But it might not be as big of an obstacle as you think. To learn more about your options, read our article on buying with little money down.
Debt Ratios Affect Your Buying Power
Mortgage lenders use several tools to determine how much of a mortgage loan you can afford to take on. And the debt-to-income ratio, or DTI, is at the top of the list. This is simply a comparison between your monthly income and your recurring expenses (car loan, credit cards, mortgage, etc.).
If you’re going to use a mortgage loan, the debt-to-income ratio will partly determine how much of a house you can afford to buy in Oregon. Most of the loan programs available today set a limit somewhere around 45% – 50%, for the total debt-to-income ratio. But these numbers are not set in stone.
How Much House Can You Afford to Buy?
We recommend a two-step process to determine how much house you can afford to buy.
- First, get a basic housing budget on paper, by subtracting all of your monthly expenses from your net income. Be sure to leave some emergency funds in the bank.
- Next, contact us to get pre-approved for a home loan. We can review your financial situation (income, assets and debts) to determine how you could borrow.
Please contact us if you have any questions about applying for a mortgage loan in Oregon, or if you’d like to receive a rate quote.