With house prices rising steadily across the state of Oregon, home buyers in need of mortgage financing often look for ways to lower their down payments. One strategy is to use an FHA loan when buying a home in Oregon. Here’s how you could end up with a low down payment by using this government-backed mortgage program.
Rising Home Prices Bring Bigger Down Payments
Like much of the Pacific Northwest, home prices in Oregon have risen sharply over the last couple of years. This is largely due to an imbalance between supply and demand. There are a lot of buyers entering the market, but not enough homes to go around. As a result, house values are climbing.
This trend also results in larger down payments for Oregon home buyers. After all, the down payment is generally measured as a percentage of house value. So rising prices lead to larger upfront investments. Home buyers, particularly those with limited funds, are always on the hunt for a low down payment mortgage solution. And the Federal Housing Administration loan program is one such option.
What You Might Pay When Using an FHA Loan
According to the real estate information company Zillow, the median home value for Oregon rose to around $313,000 in September 2017. That was an increase of roughly 10% over the some month a year earlier.
The FHA loan program requires Oregon home buyers to make a down payment of at least 3.5% of the purchase price or appraised value, whichever is less. This means the minimum required investment for a median-priced home in the state would be around $10,955 (because 313,000 x .035 = 10,955).
Some home buyers in Oregon choose to put down 20% when buying house, to avoid having to pay for mortgage insurance. But here, you’re looking at a much larger upfront investment. A 20% down payment for a median-priced house in Oregon would come to $62,200, which is cost-prohibitive for a lot of borrowers.
That’s what makes the FHA loan program a good alternative. It’s a lower down payment mortgage strategy.
Don’t Rule Out Conventional Mortgage Products
For many years, the FHA loan program was the lowest down payment mortgage option for Oregon home buyers who didn’t qualify for VA (military) or USDA (rural) home loans. But this has changed over the last couple of years.
Today, borrowers seeking a conventional home loan could qualify for a down payment as low as 3% in some cases. That’s because Freddie Mac and Fannie Mae – the two government-controlled corporations that buy mortgage loans from lenders – will both purchase loans that account for up to 97% of the home’s value.
So while FHA remains a popular mortgage loan option for Oregon borrowers seeking a low down payment, you might have other options as well. Please contact us if you have questions about how you can minimize your upfront investment when buying a home.
Using Gift Money to Further Reduce Your Investment
Did you know that many mortgage programs today allow for down payment gifts from third parties? It’s true, and it’s a helpful financing strategy for Oregon home buyers who have trouble coming up with their down payment funds.
This applies to government-insured mortgage loans as well. The Department of Housing and Urban Development (HUD) allows borrowers who use an FHA loan to obtain gift money from a third-party donor, such as a family member or employer. Many conventional loan products allow gifts as well.
The bottom line: By starting with a low down payment mortgage program like FHA, and applying gift money from a third party, home buyers in Oregon can greatly reduce the amount of money they have to pay upfront and out-of-pocket.