We created this short but informative guide to Oregon FHA mortgage loans for home buyers who are thinking of using this program when buying a house. This guide covers the basic requirements for an Oregon FHA loan, size limits, and other things you should know.
What Is an FHA Mortgage Loan?
An FHA mortgage loan is a home loan that is originated in the private sector and insured by the federal government. The program is managed by the Federal Housing Administration (part of HUD) and has been helping home buyers finance properties since the 1930s.
It’s important to note that Oregon FHA loans are not actually funded by the government. They are funded by banks and mortgage lenders within the private sector. The government insures the lender against losses that may result from borrower default.
So, to apply for an FHA mortgage loan in Oregon, you would need to work with a HUD-approved lender (like us). In that regard, this program is similar to conventional home loans. It’s the governmental insurance that makes it unique.
Minimum Requirements for Oregon Borrowers
The minimum required down payment for an Oregon FHA mortgage loan is 3.5%. This means the borrower can finance up to 96.5% of the purchase price. This relatively low down payment is what attracts many borrowers to the FHA loan program in the first place.
There are other requirements as well, including credit scores, debt ratios, and documentation. Generally speaking, a credit score of 600 or higher will put you in a good position to qualify for an FHA loan in Oregon. But that number is not written in stone.
Additionally, you’ll have to provide documents to verify your income and employment. Commonly requested documents include W-2 forms, tax returns, bank statements and pay stubs.
Pros and Cons of This Financing Option
There are some pros and cons to using an FHA loan in Oregon. This is true for any type of mortgage product, actually. The key is to choose the type of home loan that works best for you, personally.
The biggest advantage of using an FHA-insured mortgage is the low down payment mentioned earlier. It’s a good option for home buyers who have limited funds saved up for a down payment. Additionally, the qualification criteria for Oregon FHA mortgage loans can be a bit more “forgiving” when compared to conventional (non-government-insured) home loans.
The biggest disadvantage of using an FHA loan is mortgage insurance. Borrowers who use this program have to pay an upfront and annual mortgage insurance premium, which is required by the government. Most borrowers who use FHA loans have to pay the annual premium for the life of the loan. So there are some trade-offs to consider here.
Loan Limits: The Most You Can Borrow
There are “loan limits” that restrict the amount of money you’re able to borrow through this particular program. These limits vary by county and are based in part on median home prices. In Oregon, FHA mortgage loan limits range from $275,650 to $408,250, depending on where the home is located.