Oregon FHA Loan Requirements: The 3.5% Down Payment

November 1, 2016
Last updated:
February 16, 2022
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This is the first in a series of articles explaining FHA loan requirements for Oregon home buyers. In this installment, we will look at the down payment guidelines for FHA-insured home loans.

The Federal Housing Administration (FHA) loan program is a popular financing option among home buyers these days. It’s particularly popular among first-time buyers with limited funds for a down payment. When buying a home in Oregon with an FHA loan, you can put down as little as 3.5% of the purchase price.

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FHA Down Payment Requirements for Oregon Home Buyers

Oregon home buyers who use an FHA loan to buy a house must make a down payment of at least 3.5%. That’s 3.5% of the purchase price or the appraised value of the home, whichever is less. That’s the minimum required down payment for FHA loans in Oregon.

Inversely, this means that the maximum loan-to-value (LTV) ratio for an FHA-insured mortgage is 96.5%.

The Department of Housing and Urban Development’s Single Family Housing Policy Handbook states:

“For purchase transactions, the maximum LTV is 96.5 percent of the Adjusted Value.”

There are some overlapping credit score requirements as well. HUD requires a minimum credit score of 580 for borrowers who wish to take advantage of the 3.5% down payment. Borrowers with scores between 500 and 579 must put down at least 10% when using the FHA loan program. Borrowers with scores below 500 are generally not eligible for this program.

This is one of the key requirements for Oregon FHA loans. If you want to use this program to purchase a home, you’ll have to come up with a down payment of at least 3.5%.

But here’s the good news: The money can be gifted from a family member or other approved donor. So you don’t necessarily have to come up with the full 3.5% investment on your own.

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Using Gift Money to Cover the Minimum Investment

The FHA loan program offers several benefits for home buyers. One benefit is that the entire down payment can be provided by someone else, in the form of a gift. A family member, for example, could provide you with funds to cover the 3.5% down payment requirement mentioned above.

But it doesn’t have to be a family member. There are other approved sources as well. The money could be donated from a friend, employer, or an approved nonprofit agency or charity. For a complete list of approved funding sources, refer to HUD Handbook 4000.1.

The stipulation here is that the money must truly be a gift. It cannot be a loan. In fact, the donor must provide a signed letter to this effect, stating that they do not expect or require any kind of repayment.

FHA and HUD also allow the seller to contribute money toward the buyer’s closing costs, typically up to 6% of the purchase price.

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Have Questions About This Mortgage Program?

Sammamish Mortgage has been helping home buyers in Oregon, and across the Pacific Northwest since 1992. We offer a variety of mortgage programs for borrowers, including the FHA loan program. If you have questions about this program, or would like to get pre-approved for a loan in Oregon, Washington, Colorado, or Idaho, please contact a member of our staff. We can help you explore your options and choose the right type of financing for your situation.

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