Unraveling First Time Homebuyer Financing
- Randy Hamilton
- Dec 17, 2018
- 4 min read
When speaking with an electrician at a listing this morning, he mentioned that he and his wife had previously been searching
for a home to buy. He told me the area and basic information about his income and needs, and they seemed like a really good fit to purchase a home. Then he told me that they tried to buy last summer but couldn’t… I kind of perked up waiting to hear about his credit issues or over leveraged debt… this is where things took a turn.
To my surprise, he shared that they chose to stop looking because the agent he was working with told him he needed at least $30,000 for a down payment to buy a starter home.
That’s simply not true.
In our local Portland metro-area market, there are ample programs from lenders, specifically tailored for first time home buyers. The trick is to shop around, and choose a lender that’s right for you, and who can help you purchase the type of house you want. In order to do that, you must use a real estate Broker who is willing to work with different lenders and not just steer you toward their “favorite” person.
So that was this morning. This afternoon when I got back to my office, I began calling different loan officers just to make sure I wasn’t off my rocker. By the way, these are real people that I know and have used in the past. I also like to work with buyers who bring their own lender to the purchase, since that’s usually how I meet my new favorite lender. In general, I will only recommend a lender if asked. Or on occasion, if I foresee an issue with the buyer getting the house they want with a particular lending institution and I know one that I think could do better.
Because loan programs are always changing, I like to connect with them periodically to stay up to date with what’s being offered. I called 3 lenders in the afternoon; here is what I found.*
1. FHA Assistance - There is an FHA program (normally 3.5% downpayment) that will give you a "silent 2nd loan" to cover the downpayment up to 4%. A silent 2nd loan means that you will not have to make payments on the loan as long as you fulfill your obligations. Usually the obligation is to stay in the house as your primary residence for a certain period of time, but that can vary from lender to lender.
2. 5% Down Conventional - There are many 5% downpayment loan options for conventional loans in our area. These are attractive because they don’t have the high mortgage insurance payments that FHA loans have. Fannie Mae and Freddie Mac have made these available to a wide variety of lenders. It’s a common misunderstanding that you must have 20% down in order to get a conventional loan. That has not been true for quite some time.
3. Oregon Bond - Our state has a program called the Oregon Bond Program which helps people who meet certain requirements - they provide low interest loans, financial guidance, and even down payment assistance. The funds come and go for this program but it’s really a good deal if you know a lender who is familiar with how to use it. Find out more about this program here.
4. How Northwest - There is also a database in Oregon which tries to compile all of these great deals and more called How Northwest. You can find them at www.HowNW.com. They are committed to providing information without obligation. This information includes finding lenders who offer programs that you are needing, or just reliable consumer info on how to buy or sell your house. I am not on the How Northwest database because I have not taken their class to become an official agent of theirs, but I believe in what they do.
5. USDA – This program is a 0% down payment loan for properties in rural locations. Despite the rural designation, you may be surprised that the locaitons aren't as rural as you might think. To check to see if the address of the house you are thinking of buying is eligible, visit the USDA site . Check out the rest of the site also to make sure you qualify, or ask a lender who is familiar with the program.
6. Veteran’s Loans – Also referred to as VA loans. For people who have served in our military, there are special loans available that require no down payment. I think most veterans know about this, however they might not know that for homebuyers in Oregon, we are one of only 5 states that offer a state-specific Veteran’s loan program that you can use in addition to the federal VA. So in Oregon, you can use this one time benefit loan twice! Thank you for your service. More info here.
7. Region Specific Programs – There are quite a few other programs that come into play when you identify the Oregon county and city that you want to live in. It’s important that you tell your lender that you would like to look into programs in the area you are searching in.
Those are a few of the programs I found through a quick chat with some local lenders. I have made quite a few connections over the years with industry professionals who I believe are the best in the Portland area. While many lenders offer a variety of programs, some really excel in certain areas and tend to shine when partnering with buyers on houses that fit their lending portfolio. If you want some recommendations on lenders to use for a particular program, just ask. I’m happy to share.
*Keep in mind, this is general info because I am a real estate broker, not a lender. When it comes down to your specific situation, I’m happy to make recommendations but I leave your tailored mortgage plan to the lending professionals.
Randy Hamilton is a principal real estate broker with Coldwell Banker Bain Realty in Oregon City, Oregon. He is a 2nd generation Realtor, bringing over 10 years of experience to marketing properties, negotiating sales and being an advocate for buyers & sellers. As a Certified Staging Agent, he is uniquely qualified to promote your home’s best features, and he puts that knowledge to work on houses in all price ranges.
You can reach him at 503.545.8521, or randallhamilton@cbbain.com.
Randy is a licensed Realtor in the state of Oregon.