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Oregon Housing and Community Services

Flex Lending: NextStep Program Manual: Borrower Eligibility

Section 2: Borrower Eligibility

2.1 Eligible Borrower

A borrower is eligible to receive a mortgage loan under the program if, on the dates of application and closing, the following requirements are met:

  1. Income Limitation: The annual gross income of all borrowers listed on the loan application does not exceed $125,000.
  2. Residency: The borrower must be a resident or intend to become a resident of Oregon. Follow agency guidance for U.S. citizenship requirements.
  3. Occupancy: The residence financed by the mortgage loan must be occupied as a principal residence within 60 days of loan closing.
  4. Existing Mortgage Loans: The borrower must not be acquiring or replacing any existing mortgage loan on the property, with certain exceptions (e.g., construction loans, bridge loans, or qualified rehabilitation loans).
  5. Legal Capacity: The borrower must possess the legal capacity to incur the obligations of the mortgage loan.
  6. Credit: The borrower must have a credit standing acceptable to the department.
  7. First-time Homebuyer Requirement: The borrower may have prior ownership of residential real estate. (See Section 2.2).
  8. Compliance: The borrower must meet the requirements established by the department and department servicer.

2.2 First-time Homeowner Requirement

Borrowers do not have to be first-time homebuyers. Borrowers may not own additional residential real estate at closing.

2.3 Homebuyer Education

Homebuyer Education is required for all first-time homebuyers. Homebuyers must complete homebuyer education through an OHCS homeownership center.

In the event homebuyer education cannot be completed with an OHCS homeownership center, homebuyer education may be completed using Finally Home!

  • Approved lender must retain a copy of the certificate of course or counseling completion in the loan file.
  • Certificate of course or counseling completion certificate is good for one year from the date of completion.

2.4 Occupancy

Principal Residence Requirement

The borrower must occupy the residence as their principal residence within 60 days of the mortgage loan closing. The residence must be used by the borrower exclusively as a single-family residence. At no time may the borrower:

  • Use the residence as an investment property.
  • Use the residence as a vacation or recreational home.

Year-Round Occupancy

Properties must be accessible year-round regardless of location. Mortgage loans for inaccessible properties are ineligible for purchase by the department.

Ineligible Occupancy Types

The following types of residences are not eligible for any mortgage loan products offered in the program:

  • Homes intended for use as investment properties
  • Recreational, vacation, or second homes

Usage of Residence in a Trade or Business

A home with more than 15% of the total area used primarily in a trade or business does not qualify as a principal residence.

2.5 Income Limits

The borrower’s qualifying income must not exceed program income limits. The borrower's gross annual income may not exceed $125,000 based on the qualifying income as determined by the underwriters. Income tiers based on county area median income (AMI) limits may be found on our website.

  1. For purposes of meeting the eligibility criteria associated with the income limits, the loan qualifying income of all borrower(s) will be considered.
  2. Lenders must ensure that the income meets agency guidelines.
  3. The qualifying borrower(s) income will fall between one of the income tiers below:
    • 80% and below
    • 80% - 120% AMI
    • 120% AMI to $125K

2.6 Penalties for Misstatement

Any individual who makes a material misstatement in any affidavit or certification related to the mortgage loan application may face liability under applicable civil or criminal law. This applies if the misstatement is due to either negligence or fraud on the part of that individual.

2.7 Ownership Interest and Title

Vesting

Ownership must be vested solely in the name of the eligible borrower. Ownership may not be held in trust or through a limited liability company (LLC). Borrowers who occupy the residence may not own other properties at the time of closing. Non-occupant co-borrowers and non-occupant co-signers may own other property.

Non-borrowing spouse (NBS)

An NBS may be added to the title provided the following requirements are met:

  • Title report with clear lien / judgment search for NBS
  • Evidence that the NBS does not currently own any other residential property

2.8 Co-Signers and Non-Occupying Co-Borrowers

Non-occupant co-borrowers and non-occupant co-signers are eligible under the program guidelines by following the guidelines of the department’s servicer. Non-occupying co-signers’ and non-occupying co-borrowers’ income is included in the annual income limit established for NextStep.