The Home Buying and Escrow Process in Oregon
Buying a Home in Oregon: An Overview
- Oregon is an escrow state, so the process is similar to many other states.
- You’ll need the help of an escrow agent, a closing agent, and a title company.
- The contract, as well as cash from the buyer, is held in escrow by a neutral party. It’s held until an escrow agent checks that both the buyer and seller have completed their duties.
- The escrow agent then prepares a new title.
- Within a short period (usually less than a week), all documents are signed and the payments are completed.
- The escrow company then releases funds and the purchase is complete!
A Step-By-Step Review of the Oregon Homebuying Process
Phase 1: Inspections and Negotiations
During this phase, the buyer and seller will come to terms on the purchase contract, including any repairs or upgrades to the property. This phase is often completed at the same time as Phase 2.
- First, an offer is accepted by the seller and a contract is signed by both the buyer and seller.
- The escrow process starts
- Earnest money from the buyer is deposited to the seller’s agent, an escrow agent, or an attorney overseeing the contract. This money is never released directly to the seller.
- The seller submits disclosures to the buyer. These are attached as an addendum to the purchase contract, and will describe various flaws with the property, needed improvements, or necessary repairs. If needed, the disclosures will include potential environmental hazards. In Oregon, the disclosure documents must be signed by both the seller and the buyer.
- Once the contract is signed, buyers have a certain number of days to complete inspections and communicate any problems. In Oregon, buyers will likely want to complete numerous inspections, including an initial inspection and a termite inspection. A property survey may also be recommended and buyers can also request a lead inspection. They must be completed within the given time.
- If there are no issues, the sales contract can move forward. However, if issues are found during the inspections, buyers can report these issues and take one of two measures:
- First, they can cancel the sales contract.
- Second, they can request that the current owner remedy the situation.
The seller can then agree to the requests, negotiate a modification, or decline to make any further changes. In turn, the buyer can accept the response, make another change, or walk away from the purchase.
- If desired, an Oregon homeowner can request a home warranty, which is usually funded by the seller. This may not be granted, but a home warranty can cover expenses for major appliances and other costs for a specific term, usually about 12 months.
Phase 2: Securing the Mortgage
When you are ready to make the purchase, you’ll need to secure financing. This is the process for finalizing a mortgage in the state of Oregon…
- Step Zero: Mortgage Pre-Qualification or Pre-Approval
Mortgage pre-qualification or pre-approval is an important first step, allowing you to understand your budget and how much house you can purchase. It also demonstrates your ability to make a purchase, creating access to more houses. Although final approval is needed, this step is usually completed before you search for a home in Oregon.
- The first step after having an offer accepted is to submit a mortgage application, which can be done independently or through a mortgage professional like a broker or loan officer. For Oregon contracts, there will be language stating the number of days a buyer has to file their official mortgage application. (In other words, once an offer is accepted, buyers can’t delay for a month before making the application.)
- The lending organization will then send a “good faith estimate.” This is essentially a review of the estimated closing costs. Lenders make them as accurate as possible, but there is usually a small difference between this document and the final numbers.
- The lender will then send a request to the title company. This request initiates the title company to conduct a search and, in many cases, a property survey. Title insurance may also be organized and agreed to during this step. The buyers then have a certain timeframe to object to anything found in the title search.
- The buyer then submits personal finance disclosures to the lender. The lender can request a wide range of documents, but common requests include:
- Bank statements, including any and all accounts owned by the borrower
- Information on outstanding loans, lines of credit, consumer debts, car loans, and all other debt obligations. This is essential to calculating your debt ratios.
- Tax returns for the past two years. In certain situations, more documents may be requested.
- Any information related to your financial situation. This can include divorce settlements, alimony, child support, legal decisions, and liens.
- Written explanation of credit issues, such as bankruptcies, foreclosures, property seizures, or missed payments.
- Information on any large deposits or cash gifts that are not regular income. Lenders need this information because a cash gift will appear the same as a personal loan, and they want to know if the cash will need to be repaid, as this impacts your financial picture.
- The lender may also request repeated or verifying information related to any of the above documents. Remember, a lending agent or broker needs as much information as possible; the more you can provide, the more likely you will be to get an excellent loan for your Oregon home purchase.
5. Once these documents have been provided, the lender will submit a preliminary decision.
6. If appropriate, they will also issue preliminary approval, stating their willingness to fund the home purchase in Oregon. There may be conditions, including a home appraisal to verify the value of the property.
7. For most Oregon contracts, there is a requirement that the buyer complete their loan application within a certain number of days. Pay attention to this detail, as it will vary from contract to contract.
8. An appraisal is now done on the home. An appraisal, which verifies the home value, is ordered by the mortgage professional, but they cannot ask for a specific appraiser. If the appraisal is low, the lender may decline to fund the purchase. If this happens, a buyer has options. For example, they could increase their downpayment. In Oregon, it’s common for the contract to have wording that requires the property to be valued at or above the purchase price.
9. At this point, homeowner’s insurance is purchased and proof of the purchase is submitted to the lender.
10. If needed, hazard insurance, such as flood insurance or additional storm insurance, may be requested.
Phase 2 can be long and complicated so it’s essential that you start the process as soon as possible.
Phase 3: Closing the Purchase Deal in Oregon
Oregon is an escrow state. Therefore, the closing process usually follows these basic steps:
- First, the lending official will send documents to the escrow agent or professional who is handling escrow. A final settlement date is then scheduled.
- Before closing, a final walkthrough of the property is completed. This ensures the property has not suffered damage since the initial showing.
- The settlement will then occur at the office of an escrow agent, closing agent, or the title company. In most cases, the seller signs everything first.
- Next, the buyer will sign all the appropriate documents.
- The buyer then pays for their downpayment and other costs. This payment can be through a wire transfer or a check. If everything is ready, this step can be completed in advance.
- Now the deed will be ordered and recorded with the appropriate government office, such as the county or city. At this point, the agent can release funds held in escrow.
- The deal is closed and the Oregon homebuyer can go on to enjoy their new home!
Loan Limits in the State of Oregon
Loan limits for conforming loans are set by the Federal Housing and Finance Agency (FHFA), which uses a specific system to determine the maximum conforming amount on a county-by-county basis. Under this systems, loans for houses in high-cost areas can be higher than other regions of the county.
As you’ll see from the comforming loan limits map, the limits for all counties in the state of Oregon are in the “base limit,” which, as of summer 2021, was $548,250. From Clatsop County in the northwest section of the state to Malheur County, which borders Nevada and Idaho, the state is entirely within the base limits for the entire country.
For a two-unit properties, the limit is $702,000 across the state, while three-unit properties have a limit of $848,500. If you want a four-unit property, the conforming-loan limit for the entire state of Oregon is $1,054,500.
These are merely the limits for conforming loans. Larger financing may be available through the use of jumbo loans in the state of Oregon.
Downpayment Assistance Programs in Oregon
With large competition and increasing prices, homes in Oregon can be difficult to purchase. Even a small downpayment can equal tens of thousands of dollars. If you have struggled to save for a downpayment, there may be help. Numerous organizations bring downpayment assistance (DPA) programs to Oregon buyers.
Statewide DPA Programs for Oregon Residents
Oregon Housing and Community Services (OHCS)
Oregon takes a slightly different approach to DPA programs. At the state level, funding comes from the Oregon Housing and Community Services, but this group does not administer financial assistance. Instead, they send money to a variety of organizations, which then direct the funding to homebuyers.
Support is awarded to organizations throughout the state, allowing smaller groups to work with local homebuyers. Certain eligibility requirements will be consistent, but this system often creates a more streamlined process free of state-level red tape.
While the details will vary, the support is intended for low-income families and individuals. There is a particular focus on underserved populations.
Major Local Programs in Oregon
Jackson and Josephine County
Buyers in Jackson and Josephine counties can use the Home Ownership Assistance Program (HOAP), which provides support for downpayment and closing costs. This is an important program that is specifically targeted to first-time buyers.
Bend Affordable Housing Program
The city of Bend, Oregon offers support through the Community Development Block Grants (CDBG) program. This option gives potential buyers access to funding that can be used for housing purchases, the rehabilitation of a current property, or a downpayment on a new purchase.
Buyers in the northwest Oregon county of Clackamas can use a generous program that offers a small loan for downpayments and closing costs. Eligible buyers can secure as much as 6% of the purchase price, although support is capped at $14,000.
Common Requirements for Oregon Downpayment Assistance
Each program has unique requirements for financial support. The most important, and the most common, is an income restriction. Because they are intended for low-income buyers, most have restrictions on how much you can earn while still being eligible. For example, the Jackson and Josephine counties program is restricted to buyers who earn less than $73,100, with a limit of $59,000 in Josephine county.
Other restrictions include:
- A personal cash contribution (Usually around $500 to $1,000.)
- Credit requirement (Roughly 640 in most cases.)
- Completion of homebuyer education
- A limit on purchase price
These are just a few of the requirements and qualifications. For up-to-date information on DPA programs in Oklahoma, contact our team today. We’ll provide the information you need to make an informed choice on your home purchase!
Note: Information in this article is intended for general information only and should not be considered real estate or mortgage advice. Laws that govern real estate, as well as loan limits and DPA programs, are always changing. Talk with a qualified mortgage professional and real estate agent for current and reliable information.