You have a lot of mortgage programs to choose from when buying a home in Portland, Oregon. In fact, first-time home buyers are often left feeling confused and overwhelmed by the different mortgage choices that are available. So let’s simplify things a bit.
Here are the three main types of Portland mortgage programs and products you can choose from. The vast majority of home loans (more than 90%) fall into one of these three categories.
Overview of Portland Mortgage Programs
Conventional home loans: This is the most commonly used type of mortgage in Portland. A conventional home loan is one that is not guaranteed or insured by the federal government. It is generated (and sometimes insured) solely within the private sector. This separates it from the two other Portland mortgage programs listed below, which do have some kind of government backing. Conventional loans are available with fixed and adjustable rates, as well as different lengths or “terms.” Most people choose either a 15- or 30-year term. Down payments generally range from 3% – 20%.
FHA loans: The Federal Housing Administration (FHA) home loan program is one example of a government-insured mortgage program. With this financing method, the loan is insured by the FHA. But the money still comes from a bank or mortgage lender in the private sector, just like with a conventional home loan. It is the government backing that makes the program unique. FHA loans offer down payments as low as 3.5% with flexible qualification criteria. Learn more here.
VA loans: This is another Portland mortgage program with government backing. This time, it’s the U.S. Department of Veterans Affairs (VA) that guarantees the loan. This program is limited to military service members and veterans, and their spouses in some case. The best feature of this mortgage program is that it allows for 100% financing. That means eligible borrowers can buy a home in Oregon with no money down.
Jumbo vs. Conforming Loans
When researching mortgage loan programs in Portland, you’ll likely encounter the terms “conforming” and “jumbo.” These terms relate to the size of the loan, in relation to pre-established guidelines used by Freddie Mac and Fannie Mae.
Here’s the difference:
A conforming loan is basically a conventional home loan (defined above) that meets or “conforms” to the size limits used by Fannie Mae and Freddie Mac. Because it meets their criteria, a conforming loan can be sold to Fannie or Freddie — and then sold again to investors. The conforming size limit for a single-family home in Portland, Oregon is $424,100. That limit will remain in place throughout 2017.
A jumbo loan is one that exceeds the conforming limit mentioned above. It is therefore considered non-conforming, and cannot be sold to the government-sponsored enterprises (or GSEs). The qualification criteria can be a bit more strict for jumbo mortgage products in Portland, since it’s a larger loan that brings more risk. As for their size, jumbo mortgages can exceed $1 million in some cases.