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Becoming a homeowner is a major step in life. It’s also a major decision that shouldn’t be taken lightly. If you’re looking to buy a home in Seattle Washington, here’s how to get best financial value for your investment.
In 2017, median home prices in King County, Washington were around $625,000, an increase of over $85,000 from the previous year. Many people might look at that and think they’ve got no chance at owning a home in the area. But, the median price for homes in nearby counties is generally significantly lower than the median price in King County.
For instance, Kitsap and Pierce counties both have median home prices around $315,000, less than half that of King County. Snohomish County has a median home price of about $450,000. What this means is that, if a longer commute isn’t a deal breaker for you, then you can find affordable housing in the suburbs.
Even if you want to stay within Seattle city limits, there are plenty of neighborhoods that skew toward affordability. The most inexpensive neighborhoods in Seattle have median prices that hover around $400,000 and include:
So, even though home prices are increasing at a record rate, you can still find options within your budget if you know where to look.
When you look at a house that needs a little TLC, your brain might automatically skip over it as a viable candidate. The amount of work that these houses require may not be what you signed up for. But, you shouldn’t dismiss fixer-uppers outright. While you will be required to put in a little more leg work (and money) to get the house in adequate shape, you’ll also probably get a better deal overall.
A new house with all the bells and whistles sounds simple enough. All you have to do is move in and go on with your life. But, a house that needs a little work could save you money in the short and long run.
A new paint job, some new lights and fixtures, and maybe a landscaping upgrade can go a long way in improving the character of a home. You need to weigh the cost of improvements with the amount you will save from purchasing a house that is turnkey ready.
A good credit score can go a long way in getting you a better deal on your home loan. In general, scores above 740 will get you a lower interest rate, which will reduce the overall amount you’ll have to pay to your lender. But, what if you’re credit score leaves a bit to be desired?
There are a few easy ways to improve your credit score. One of the simplest is to check your score and try to identify any errors that might be limiting its potential.
The three major credit-reporting companies (Equifax, TransUnion, and Experian) keep track of your credit, but sometimes mistakes are made. If you notice an error, the credit reporters are required by law to answer any error complaint within 30 days.
If your score is lower than 740 and there are no errors on your report, then you still have options. These include:
You should always monitor your credit as it may take time to clean up some negative information. Even if you just started your home search, check your credit now so that you can have things up to par when it comes time to apply for a loan.
There are numerous governmental grants and programs that individuals and families can use to get a leg up in the home buying process. One of the most common programs used by prospective home buyers comes from the Federal Housing Administration (FHA).
An FHA loan is backed by the federal government and requires borrowers to pay for mortgage insurance that protects lenders in case of default. While mortgage insurance can be costly, these loans make it easier on homebuyers by offering:
The FHA also provides the Section 203(k) Rehabilitation Program, a different loan program designed specifically for fixer-uppers. Down payments can be as low as 3% of the purchase price and you can also borrow money from FHA to cover the repair and remodel costs. Other possible loan programs include:
Additionally, the state of Washington has a variety of home buying assistance programs that you can use either standalone or in conjunction with federal programs.
It doesn’t take an expert in home buying in Seattle, Washington to know that you probably won’t get the best mortgage deal with the first lender you contact. There are many choices you have when it comes to home loans. The two major factors will be if you choose a conventional lender or mortgage broker.
Different lenders have different terms, and it’s up to you find the terms that work best for your situation. Make sure you check with your bank also, because your existing relationship can get you a better deal on a home loan.
You can also go to a mortgage broker who will essentially do all the leg work when it comes to finding the perfect loan for you. Mortgage brokers usually have access to a network of lenders, meaning that they can offer a wide range of possible options. They can also advise you on what loan best suits your current situation.
It’s also a good idea to get pre-approved for a loan from different lenders. Pre-approval takes the guesswork out of the home buying process in that it identifies how much a lender is willing to let you borrow. With this knowledge, you can focus only on the houses that are within your budget.
Even after you’ve chosen a lender, you don’t have to abide by all the rules, regulations, and fees they propose. Negotiation is a great tactic for reducing the amount you’ll have to pay in the long run. Fees and rates that you can negotiate down include:
Some mortgage contracts can be riddled with “junk” fees that include costs you can eliminate or reduce drastically. Be sure to read the fine print and do your best to get some fees waived. In some cases, having a higher credit score can lessen the blow of some of these fees (another good reason to improve your credit score).
The standard length of a mortgage loan term is 30 years. Most people also opt for fixed rate mortgages because they offer a consistent payment amount each month. But, is a 30-year fixed rate mortgage the right choice in every case? The answer, of course, is “no.” A 15-year mortgage allows you to pay the loan off twice as fast while also limiting the amount of interest you’re hit with. Monthly payments will be higher than payments with a 30-year mortgage, but if that’s something you can handle, then it may be worth your while.
You can also elect to go with an adjustable rate mortgage. These work by fluctuating with market interest rates rather than staying at a fixed rate. For instance, a fixed rate mortgage might lock in your interest rate at 4.1% for the duration of the loan term. An adjustable rate mortgage, however, will go up and down as market interest rates fluctuate. So, you can have an interest rate of 2.5% one month and 4.3% the next month (although that jump may be drastic).
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