Financing in Portland>Question Details

Phrygianmode, Home Buyer in Portland, OR

How much down payment do people typically need currently?

Asked by Phrygianmode, Portland, OR Fri Oct 14, 2011

My finances will be changing drastically in the next year (increase in salary from 50k->170k) and I'd like to buy. Problem is, I probably won't have much more than 15-20k for a down payment due to my current low salary. What are people seeing in terms of down payments for medium sized loans ($350k or so)?

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Lana Lavenbarg’s answer
It will depend on a number of things. One your credit scores, 2, your income to debt ratio and 3 - the amount of loan you will need. Let me give you a scenario: If you were to buy a home at $300,000 and have an 800 credit score and less than 30% debt ratio you may be able to have a down payment of $15,000 and have sellers pay for your closing costs. You will want to make sure you have some money left in the bank for maintenance and those "just in case something breaks" type of situation. Does that help? I used a 5% down for this one.
2 votes Thank Flag Link Fri Oct 14, 2011
There are a few options available to you... as mentioned you can go FHA with 3.5% down, it carries mortgage insurance for at least the first 5 years but cancels at a 78% loan to value. There are conventional programs with as little as 5% down but if you put down less that 20% you will need to pay Mortgage Insurance in lieu of the extra down. The private MI can be paid monthly, built into the rate, financed, or paid as a lump sum. If you are a Veteran you may qualify for a VA Loan which does not require a down. I would consult with a mortgage professional first and foremost to see which loan program is best for you and plan accordingly.
1 vote Thank Flag Link Fri Oct 14, 2011
I should mention my credit rating is excellent. I'll have a good deal of student loan debt still (150k), however, but no other debt.
1 vote Thank Flag Link Fri Oct 14, 2011
I had forgotten to mention that there is also an option with Fannie Mae to put down as little as 3% on a home loan. Since this is a conventional program it does not have the high upfront MIP that FHA has and it still has a lowerr monthly MI payment as well. This can be a great option for a low down payment especially if you have good credit scores.
0 votes Thank Flag Link Thu Sep 13, 2012
FHA loans right now require only 3.5% down. Conventional loans will require 3 or 5% down depending on the product and availability with your specific lender.

HUD foreclosures in many areas have the option of putting only $100 down.

VA loans carry no down payment requirement.
0 votes Thank Flag Link Wed Sep 12, 2012
3.5% generally for FHA and 5% for conventional. Shouldn't be a problem for you.
0 votes Thank Flag Link Wed Sep 12, 2012
You only need a 3.5% down payment and you can get the seller to help you with up to 6% of pre paids and closing costs. But you must be able to qualify and FHA has the highest ratios. Most sellers with the activity today are not wanting to reduce the price of the house that much but you can increase the price and basically borrow the money back. There is also a 203K loan that you can borrow up to $30,000 that you can remodel with no structural repairs and you can buy a new kitchen or baths and appliances or windows, paint, insulation, carpet and a new roof, so it gives you many more options and you still only need 3.5% down. The house has to appraise for the increased value and you have 6 months after you close to complete the work so the appraiser can come back and approve the final job. Send me an email if you need a lender that can help you get pre approved and not pre qualified for a loan in 5 days. You need this with all the sale fails when the lender turns you down 5 days before closing because the underwriter does not like what the mortgage broker used for income justification. It is better when there are two offers that you have your loan guaranteed. Let me know how I can help you?

Tom Inglesby, Broker
RE/MAX Equity Group
0 votes • Reply • Flag • Delete • A moment ago
Tom Inglesby, Real Estate Pro in 97239
0 votes Thank Flag Link Thu Aug 9, 2012
Here's a link to an article I just recently wrote about "how much" There's a few variables in any "how much" question. Hope the article is helpful.
0 votes Thank Flag Link Sat Jun 9, 2012
There are 3 lenders that have $0 down payment requirements

I used to work for one of them.

The typical answer is going to be 3.5% down payment for FHA, $0 Down for VA and USDA

The Three Lenders that you are looking for do not have channels for brokers to get to.

Email me and I will help you find the right loan program as well as share with you the secret how to get your home paid off in 6-10 years without refinancing or paying any more than you are set up to pay.

0 votes Thank Flag Link Tue Nov 1, 2011
Speak directly with local lenders; you may qualify for as little as 3.5% down with an FHA loan.

Mark Fleysher
0 votes Thank Flag Link Mon Oct 17, 2011
On a single family home your choices are a little limited dueto the fact that the current FHA loan size limit is too low to accomodate a $350,000 loan. I would look at a conventional loan at 5% down. This loan will have mortgage insurance but the MI can be paiod for in a couple of different ways.

The first and most common way to pay for the MI is to simply pay the premium monthly. This is simply added to your payment. A second options is called Lender Paid Mortgage Insurance (LPMI). LPMI is paid by the lender and charged as a one time, lump sum fee. You can either pay the fee up front or raise your interest rate a little to cover the cost. This is cheaper than the monthly MI but unlike monthly MI the rate on the loan will never go down.

If you do find a home that can be financed FHA then you will only need 3.5% down payment but recent changes to the cost of the monthly mortgage insurance have made it a more expensive option than a conventional loan so only use it if it's all you qualify for. Many loan officers have a knee jerk reaction to use FHA first and cost their clients thousands of dollars over the life of the loan.

Good luck and if I can help in any way just let me know.
Web Reference:
0 votes Thank Flag Link Sun Oct 16, 2011
FHA would be the lowest type of credit home financing, where you would need 3.5% down payment for a credit pre-approval. 1st time buyers or buyers that haven't owned a home for 3 years, may qualify for a down payment grant / gift from the government to buy a home. That right, a FREE gift of money if you qualify, credit education, debt to income ratio and job time will be some other deciding factors in the end for a credit loan pre-approval. Work equity is another form of down payment, that's very popular when building a new home. Work equity can also be given as down payment on a existing home, but sure your lender and realtor do there homework before requesting this in the purchase contract. Work equity down payment may be the only way for some to achieve down payment and realize the American dream of home ownership. Work equity with the 203k rehab loan, can take a old cheap house and make it a brand new affordable home. Take action today, dont miss out on the Real Estate sale of a life time today and get started with educating yourself about credit monitoring, credit reports, credit scores and credit financing. You should also get advice on how to protect and challenge your credit report, the Fair Credit Reporting Act of 1971 is knowledge you should know!! Once you have completed using the ACT of 1971 to challenge the credit, you need Continuous Credit monitoring and ID Theft protection (Learn about the FIVE common types of Identity Theft)!
0 votes Thank Flag Link Sun Oct 16, 2011
There are so many different loan programs to choose from and giving you many different options ranging from 3.5% and up. It seems you will have enough for a down-payment and working with a great Mortgage Broker can be the difference from a good loan to a great loan. My goal would be to help you secure the lowest monthly payments using the best in the industry....and I'm working with one of the best. Please let me know if you have not already secured a Mortgage Broker and I will be happy to pass along their contact info.

Ideas on neighborhoods to live in Portland, check out this easy to navigate neighborhood guide containing every home for sale in your chosen favorite neighborhood. One of the easiest ways to search for homes.
Included on this link is one of the most powerful interactive home searching maps anywhere in Oregon.

When you are ready to view, give me a call, my days area available and I have some great recommendations you will love in that price range.

Thank you,
Kevin Levy
M Realty LLC
0 votes Thank Flag Link Sat Oct 15, 2011
If you qualify for FHA loan you need at least 3.5% down payment.Good luck
0 votes Thank Flag Link Sat Oct 15, 2011
If you are a W2'd salaried employee you might only provide a letter explaining why you received such a large increase and document it. The 2 years past history will show longevity and as long as the increase is a permanent one you are fine... your situation would NOT require an exception. It is typical for someone completing a work study/intern position then earning placement into a permanent position.

As far as the closing costs go many buyers will opt to roll it into the offer and have the seller pay them or you can opt for a slightly higher rate and receive a rebate from the lender.

Once you have a paystub showing the new higher rate of pay you can qualify using that income.
0 votes Thank Flag Link Sat Oct 15, 2011
you can buy FHA with 3.5% down. You increase in salary is nice but if its not in the 2 years of tax returns you provide the bank you will need a exception for them to count it towards your total income in regards to qua;ifying for the loan.
0 votes Thank Flag Link Fri Oct 14, 2011
Having recently gone through this as a buyer, I can say that you probably haven't saved enough. Lending practices are changing which I learned in the middle of my loan. If you are buying a home for $350K, you'll likely need to go conventional. Factoring in Escrow (Earnest money - $8K - $12K), inspection ($300, will need to do the full inspection and include terminite b/c the insurance company requires certain inspections), insurance (must pay first year up front - $4K - $6K), attorney fees ($750 - $1000), down payment (10 - 12%).
Some will say go FHA, well you'll find that with a house for $350K or above, it won't make sense, the loan officer can tell you why when you do the math.

All in all, don't expect to walk away paying less than about $50K - $60K for a home in that range.

You will hear a lot about Cash offers, etc. My advice - Be patient and diligent. Also, depending on where and why, stay away from Townhome condos UNLESS you know the association is ACTIVE. I wasted over 3 months on a short-sell, only to find the association wasn't active, which means you can't get a loan. You need the association because parts of a townhome are shared - like the roof. Good luck
0 votes Thank Flag Link Fri Oct 14, 2011
your buying "power" is best determined when you meet with a lender and break-down some numbers. this is the easiest way you can provide yourself with the right answer to your question. a lender typically can also explain to you the best product (loan) for your situation or explain the differences between various ways to finance your future purchase. And don't count on your future raise (the bird in hand....those in the bush). Stay in your present salary buying power. And a lender won't count at all on "future" raise. A lender take into consideration what you make now (and in the past). Or you can simply wait for the next year so you can prove to the lender the salary raise.
And when the lender provides you with the answer you can contact a real estate agent to find a property based on your needs. There are good deals on the market these days but you don't have to jump on the first one you see. This is not a purchase you make every single day. With this kind of market you should probably need to live in the house for the next 5-10 years in order to see some appreciation. But with a smart decision you can purchase a property where you can have already some equity (due to a lower price). Patience and perseverance is the right way.
I can provide you with at least 3 reliable lenders in the area. Just let me know if you'd like this info. Also, feel free to contact me with any other question you may have.
All the best.
0 votes Thank Flag Link Fri Oct 14, 2011
Check out these financing options courtesy of Doug Mendenhall at Alpine Mortgage:

1. 5% down NO Mortgage Insurance – your best bet for good credit score buyers with little down is 5% down with NO mortgage insurance; we have a special program for these buyers with 680 scores or higher, as of 10/7/2011, rates start at 3.875% , APR 4.28% depending on credit score.

2. 20% down with good credit will always get the best rates for any program, , as of 10/7/2011 30 year fixed rates are 3.875%, APR4.17%.

3. FHA financing still allows 3.5% down, which is the lowest down payment option right now, it will have mortgage insurance. as of10/7/2011 30 year fixed rates are 3.75%, APR 3.87%.

4. 3.5% down owner-occupied Duplex, Triplex, Fourplex purchase allowed – amazing deal for buying a partial rental property, you must live in one of the units, as of 10/7/2011, rates start at 3.75% , APR 3.87% depending on credit score.

Let me know if there are any properties you are interested in viewing or you would like to talk about buying/selling a home. For lending options, I've included Doug's contact info Below.


Doug Mendenhall Alpine Mortgage NMLS #205740 Equal Housing Lender Cell 503-317-9435
0 votes Thank Flag Link Fri Oct 14, 2011
All great answers, and as stated a mortgage broker or banker will be able to evaluate your particular situation most accurately, when you're ready.
Yes you'll be making a great income, but if something unexpected happens at your company, would you be able to replace that salary at another company? You can get a lot more for less today and taking on a huge debt when you still have school loans to pay, is a consideration. Do you really need a place for $350k when there's very nice homes in good areas of the Portland metro for less? Make sure you look at the big picture in your budget planning and consider what's reasonable.
Most of the buyers I work with in that range have 20% for a down payment. You can do a 95% with only 5% down if you and the property qualify, but remember you'll need closing costs too. I would estimate 4% closing costs to be on the safe side, it depends on type of loan, annual property taxes and other factors. FHA is 3.5% down as said before, with potentially higher closing costs. You'll also need moving expenses and a buffer in savings, which will likely also be required by your lender.
It's an exciting time for you....congratulations! You're definitely fortunate to be able to buy at a time when the prices and interest rates are in your favor.
Best to you,
0 votes Thank Flag Link Fri Oct 14, 2011
For any of you reading this because you have the same question, please re-read the first answer. The original question was from someone with an excellent credit score, so the 800 used in the example is appropriate.

I'm writing this to remind people who don't have such a high score (850 is top) that it can be a key factor in not only the mortgage rate, as you would expect, but the amount of down payment.

Also re-read what the first answer said about debt-to-income ratios. If your debt is 60% of your income (being ridiculous to make a point), you're going to find it hard to get a loan at any price no matter what your FICO score. If your debt is 10% of your income, you are in a much better position to shop for a good rate (unless your FICO score is too low (below 700).

Does this sound complicated? It is. That's why you need to have your conversation with a mortgage broker, not a Realtor (nice as we all are). If you need recommendations, I have two for the asking.
0 votes Thank Flag Link Fri Oct 14, 2011
All good answers and I see someone did mention closing costs so I'll elaborate on that. In the Portland Metro area closings costs generally come in at about 3% of the sales price. That's money in addition to the downpayment that you will have to bring to the table one way or another. Your buyer's broker can include a good chunk of those closing costs in your offer as part of the negotiations. However, if you are looking at short sales don't expect the seller to pay closing costs. They are already out of money.
0 votes Thank Flag Link Fri Oct 14, 2011
Your down payment needed is determined by the type of loan you'll need and the purchase price. You can get that question answered by your lender, Mortgage Broker, or Loan officer. In percentages, FHA is 3.5% minimum, Convential is usually 20%, but there are a lot of 100% financingprograms offered, as well! You can log on to my web site and find some great Mortgage Brokers to answer all your lending questions: 503-936-2432
Jewel K Stockli, Real Estate Broker, and "Jewel Of The Rock"
0 votes Thank Flag Link Fri Oct 14, 2011
Congrats on the raise! Usually 10-20%. However FHA is as low as 3.5%. Email me and I'll get you more info. You should be fine to buy and now is a great time.
0 votes Thank Flag Link Fri Oct 14, 2011
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