With lending changing in recent months, home buying is not as easy as it has been in the past few years. Despite this change, there are many types of loans for homebuyers to consider.
It is time for you to start to consider buying a home in the Salem Oregon area, but before you do that, you need to consider the financing options you have. It isn’t just FHA, conventional, and cash. Depending on what you are looking for, there are other options for you.
A Marion County home
Fixed-rate mortgages are pretty basic. Your interest rate is fixed for the entire length of the loan. The loan can be for 15, 20, and 30 years. Most people like fixed rates loans because they don’t change. This makes budgeting easy and buyers know what future payments will be. 15 and 20-year loans tend to have a lower interest rate than a 30-year loan because there is less risk to the lender. Buyers often choose 15 and 20-year loans when they want to pay their home off faster. Equity builds up faster with this type of loan, but the trade-off is that the payments are higher. This can be problematic if a hardship occurs. Whether this term loan makes sense depends on your financial situation. Most buyers choose the 30-year loan term. While the interest rate is higher than with the 15 and 20-year loans, the monthly payment is lower, which makes it easier to qualify for a loan. Equity builds more slowly, so over the life of the loan, buyers end up paying more interest on a home loan than with the 15 and 20-year loans.
Due to the economic climate, many buyers may be afraid to consider an ARM purchase with a home. ARMs are a more risky loan since the interest rate will adjust after a certain period of time. ARMs typically have a cap rate, which is the maximum amount the interest rate will go. There are many different financial indexes which is what ARM interest rates are based on. The LIBOR (London Interbank Offered Rate) is very common and is called the LIBOR ARM. Other indexes include the COFI (Cost of Funds-Indexed) ARM, T-Bill rate, and the Certificate of Deposit Index. Your local Salem Oregon lender can talk with you about whether or not an ARM makes sense for you.
For some buyers, the Veterans Administration (or VA) loan may be possible.
VA Loans: Honorably discharged veterans may qualify for a VA loan. VA loans are insured by the Veteran’s Administration. VA is one of the few programs that offer 100% financing these days. Buyers can also get up to 6% in seller-assisted closing costs and prepaids on these loans. They also offer a construction loan and a rehab loan so for veterans that want to build on land or if the property doesn’t meet the VA required minimum property standards, then they can look at the rehab loan option instead.
ODVA: The Oregon Department of Veterans Affairs has its own loan program for vets. It is a 5+% down loan program that uses conventional lending standards. ODVA only originates loans so no refinances through them. Interest rates tend to be lower, and closing costs are very competitive. It is an excellent choice for veterans buying a home here in Oregon.
FHA 203 (b) The loan program originally started for low-income families to get into housing since the down payment requirement is 3.5%. FHA loans can be a great loan for first-time homebuyers that don’t have a lot of cash. This is the standard FHA loan program that most people use. People with dinged credit or higher debt to income ratios will often use this FHA loan to buy a home.
FHA 203 (k) This is the FHA streamline rehab loan. This is a good loan for properties that need some work, but nothing structural, that needs updating like a kitchen remodel or items that keep the property qualifying for the minimum property standards like a bad roof that needs to be replaced.
The Rural Development Housing & Community Facilities Program has a loan program for lower and moderate-income families that want to purchase a home in a rural area. There are income caps for this program as well as location restrictions. The property has to be in a designated rural area. This program does not require a down payment, so it can be a great program for those that qualify. in Marion and Polk county you can’t use this program for Salem or Keizer city limits.
Oregon Bond Loan: The Oregon Housing and Community Services Program has a loan program commonly called the “Oregon Bond Loan.” It is for lower-income families and encourages homeownership. There are income caps for the program, but the interest rates are very low. This loan has certain eligibility periods and only offers money at certain times of the year. Money does run out as this is a high-demand program.
We have other creative financing options from private loans to downpayment assistance programs as well. You can just contact us to discuss those needs.
Ready to buy?