First Time Homebuyer Loans, Downpayment Grants, and More – 2020 Update

first time home buyer loan

Is 2020 your year to buy a home in Portland? Making the leap from renter to homeowner is possible even if you don’t have the traditional 20% down payment. From below-market interest rates to help from private investors, there is assistance available for all first time homebuyers. Read on for our updated list for 2020.

First, some definitions:

First time home buyer: Any individual who has not owned and occupied a primary residence in at least three years.

Cash assistance: A sum of money that you don’t have to pay back, that goes toward the down payment on the home. This is sometimes also referred to as a grant.

FHA (Federal Housing Administration) loan: A loan backed by the federal government, administered through Fannie Mae or Freddie Mac. Many homeowners are grateful this year that they financed their homes through one of these institutions; they offered immediate coronavirus relief for mortgage payments.

PMI (Private Mortgage Insurance): An insurance policy you take out to provide security to the mortgage lender if you default on your loan. It’s often required for low-interest or low-down payment loans.

Oregon Bond Residential Loan Program

Oregon Bond is Oregonians helping Oregonians. Property owners fund periodic bonds; these funds are used to offer cash assistance and below-market interest rates on FHA loans for homes (including condos, manufactured and new homes) in Oregon

  • Get a below-market interest rate and/or cash assistance toward your closing costs.
  • Current rates on a 30-year mortgage offered as of April 2020: 3.375% APR standard or 4.25% with cash assistance.

To qualify for Oregon Bond:

Mortgage Assistance through Portland Housing Center 

Portland Housing Center (PHC) is a local nonprofit organization with a 30-year history of supporting homebuyers in our area. Among other services, they offer a Mortgage Assistance Program, which is a loan to cover the down payment and closing costs on a home.

  • The Mortgage Assistance Program (MAP) loan is at a low, fixed rate. It can cover up to 20% of the home’s purchase price (but is capped at $60,000)
  • Utilizing MAP can eliminate the need for an upfront mortgage premium and PMI.

To qualify for Mortgage Assistance through PHC:

  • You must be a first time homebuyer with an income of no more than 100% of the area median (look up the current Area Median Income limits for Portland here)
  • The home must be in Multnomah, Washington, Clackamas, or Clark County, WA
  • Borrowers will need to first qualify for financing for the purchase of the home. After that, the down payment on the MAP loan is just $500.
  • MAP pre-approval is available; contact Portland Housing Center to get started.

Down Payment Assistance through Portland Housing Bureau

The Portland Housing Bureau is the city government entity that administers low-income housing programs. Much like PHC’s MAP loan, the Portland Housing Bureau’s Down Payment Assistance Loan is a second loan that can be used to cover the down payment (but not closing costs) for a home. It was created to bring minority homeowners back to certain areas of Portland where gentrification has made buying a home difficult. The Down Payment Assistance Loan is a little harder to qualify for, but it has a lot of perks for those who do:

  • Borrow up to $61,000 at 0.012% APR
  • Use the funds to purchase a home in Portland’s Interstate Corridor or Lents Town Center Urban Renewal Areas
  • The loan doesn’t need to be paid back until the home is sold or refinanced
  • An additional grant of 25% of the loan amount can be obtained for home improvement

To qualify for Down Payment Assistance through PHB:

  • You must be a first time, usually minority homebuyer with an income of no more than than 80% the Area Median Income (look up the current Area Median Income limits for Portland here)
  • Hold no more than $10,000 in liquid assets at the time of closing
  • Provide a down payment of at least $500
  • Work with a PHB-approved Community Partner to find out if you quality, then apply for the loan.

Unison HomeBuyer Program

Unison is a San Francisco startup that “co-invests” in homes, contributing up to half the down payment in exchange for a return on their investment when the home is sold. Unison’s HomeBuyer program could be helpful to those who don’t qualify for home buyer assistance programs meant for low-income buyers. Avoid this program if you can find any another alternative. The final costs are very high and can strip you of a lot of home equity.

  • Unison HomeBuyer is not a loan, but it does come with a 2.5% origination fee.
  • Unison pays for half the down payment, and they expect it back if the home gains in value after 30 years or when the home is sold. They also take a percentage of the home value gained in that time. If the home loses value, a percentage of that loss is taken out of the amount owed to Unison. Homebuyers also have the option to buy Unison out after 3 years. A detailed breakdown of the math is here.
  • By investing with Unison, home buyers can avoid paying PMI, and lower their monthly mortgage payment. However, in a housing market where homes gain in value quickly, the amount owed to Unison may be above and beyond what you would have paid in PMI.

To partner with Unison HomeBuyer:

  • You need a credit score of 620 or higher.
  • The mortgage must be through one of Unison’s partner lenders.

Individual Development Accounts

Saving up for a 20% down payment is the easiest way to avoid PMI and pay lower monthly mortgage payments in the long term. Many Oregonians have successfully used Individual Development Accounts (IDAs) to fund a down payment. Here’s how it works:

  • Make a small monthly deposit into the Individual Development Account. Reach your savings goal within the set timeframe (usually 6-36 months), and the IDA fund will provide a matching amount.
  • Match amounts start at 3:1 (eg. save $1,000 and receive a $3,000 match) and can be up to 6:1
  • IDA funds can be used toward starting a business, higher education, home purchase and more

To qualify for an IDA:

Get a Free Consult with the Best

Keep in mind that any of the programs listed above could expire, and may not be available next year. In addition, there may be a waiting list for some programs, especially the IDA. Just like finding the perfect home, obtaining the financial help to make it possible is a journey — so get started early. And, if you are thinking of buying a home in 2020 or beyond, it’s never too soon to contact a top 1% buyers’ agent! Our real estate team loves working with first time buyers, and we are here to help.

May 15, 2020
AUTHOR

Stephen FitzMaurice

Stephen FitzMaurice, Realtor is a top 5% real estate agent in the U.S. A Principal Broker in Oregon, Managing Broker in Washington, he has been licensed since 2003 for residential real estate sales. Call his team in Oregon at 503-714-1111 or in Washington at 360-345-3833.

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