If you are in the market to purchase a new home and have done research on obtaining a mortgage you have likely heard the term Private Mortgage Insurance. The term PMI is thrown around a lot in the mortgage world; however, many consumers are unaware of what it is and why it can be required.
Do you have questions about home loans in Oregon? Chances are, you’ll find the answer below. These are five of the most common questions that Oregon home buyers ask about mortgage financing.
1. What’s needed to qualify for a home loan in Oregon?
While mortgage standards and requirements can vary from one loan program to the next, there are certain common “ingredients” lenders look for when reviewing applicants. Here are some of the things that are usually required to qualify for a home loan in Oregon:
- Some form of income that is sufficient to repay the loan
- A decent credit score, generally 600 or above on the FICO scoring scale*
- A good balance between your monthly income and debts
- A down payment in some cases, depending on the type of loan you use
- Enough money to cover your closing costs, unless the seller chips in
- Financial paperwork/documents relating to your income, assets and debts
* This number is not set in stone. Credit score standards can vary.
This is not a complete list, but it does include some of the most important requirements a person needs to qualify for an Oregon home loan.
2. What types of loans are available for borrowers?
You have a lot of choices when it comes to getting a home loan in Oregon. One of the biggest choices has to do with the rate structure.
- A fixed-rate mortgage carries the same interest rate for as long as you keep it. This financing option offers the most predictability and payment stability, but might cost more in interest than an adjustable loan (see below).
- An adjustable-rate mortgage, or ARM, lives up to its name by having a rate that can change or adjust over time. These Oregon home loans offer the benefit of a lower rate in the short term, though that can change after a few years.
In addition to the rate structure, you also have choices regarding private versus government-backed loans. Here’s the basic difference:
- An Oregon conventional home loan is one that is originated (and sometimes insured) within the private sector, with no government insurance or guarantee.
- A government-backed mortgage loan, such as the FHA and VA programs, includes some kind of government insurance. This insurance protects lenders in the event of borrower default. Generally speaking, these programs are easier to qualify for than a conventional Oregon home loan.
3. How much can I borrow when buying a house?
Your borrowing capacity will largely depend on the amount of money you earn each month. The amount of recurring monthly debt you have also plays a role.
Mortgage lenders use what’s known as the debt-to-income ratio, or DTI, when reviewing home loan applicants. This is a comparison between the amount of money you earn, and the amount you spend to cover your various debts (including your mortgage payments).
While the standards can vary, most loan programs today set a cap somewhere around 45% to 50%, for the total debt-to-income ratio. This is one factor that will affect how much you can borrow for a home loan in Oregon.
4. What is the maximum mortgage size for the state of Oregon?
The maximum sizes for the different mortgage programs are referred to as “loan limits.” Different limits can apply, depending on the type of mortgage product you use. In some cases, these limits can vary by county because they’re based on median home prices.
- Conventional: For a single-family home purchase in Oregon, the conventional loan limit is set at $424,100 in 2017. These limits could go up in 2018 due to rising house prices.
- FHA: The loan limit for a single-family home purchase with an FHA loan varies by county. It ranges from $275,665 for most counties in Oregon, up to $408,250 for the more expensive areas like Portland.
It’s important to note that mortgage financing is available above these limits. When you borrow more than the conventional loan limit shown above, it’s referred to as a jumbo mortgage loan.
5. What’s the best kind of loan for my situation?
The best way to choose an Oregon home loan is to seek help from a knowledgeable broker or loan officer. And that’s where we come in. Sammamish Mortgage has been helping borrowers across the Pacific Northwest for more than 20 years. We can answer any financing-related questions you have, as well as providing you with an estimate of your monthly housing costs.