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. and a top 1% agent in the Portland Metro. Principal Broker in Oregon, Managing Broker in Washington he has been licensed since 2003 for residential real estate sales in the Portland Metro area. Call him direct: 503-714-1111.

Pay less (4.5% commission max.) and get more with his top 1% listing team or buy your next home with his excellent top 1% buyer’s team. We work from Salem, Oregon to Vancouver, Washington and beyond. Check out our full services areas on the top menu.