How much of a down payment do you need to buy a Seattle house?
There are a variety of factors that will determine exactly how much of a down payment you need to buy a house in the Seattle area, including your own preferences.
While you can certainly choose to put down more money, there are still fantastic low down payment home loans that may make buying a Seattle house even more attractive than you thought.
How Much Down Payment Do I Need For A Seattle House?
How much or little you’ll need as a down payment when buying a home in Seattle depends on these factors.
What Type Of Seattle House Are You Buying?
This is one of the ‘gotchas’ that can really catch Seattle home buyers by surprise. It’s not just about what you qualify for.
Property condition can be a factor. Homes with structural defects and big repairs are a big turn off to most lenders. You may need a specialist lender who may even give you money towards repairs and improvements too.
Builders may also ask for a lot more money as a deposit on new construction homes and condos than the bank would require you to put down.
Somewhere in the middle of these two scenarios is probably the sweet spot for achieving the lowest down payment.
Condos, townhouses, non-warrantable condos, co-ops and other properties within homeowners associations can be seen as riskier to lenders as well. They may require extra forms to be completed, and in some cases may need a larger down payment.
Price is a factor. Most lenders don’t want to finance properties under $100,000. Those purchasing properties requiring non-conformming loan limits and needing jumbo mortgages may also expect they could be asked for a slightly larger down payment.
Location plays a role too. While lenders aren’t legally supposed to redline areas on the map, they do. If there is too much crime or fraud, they won’t loan there. Or they want the borrower to put in a larger percentage of the purchase price to share that risk.
Interestingly more rural and suburban properties can actually qualify for special USDA home loans. These mortgages offer up to 100% of the purchase price, and may let the seller pay most of your closing costs. All with zero down payment needed.
What Are You Buying This Seattle House For?
Why are you buying this property?
Do you intend to live in it yourself? Are you going to use it as a vacation home? Or is it meant to be an investment?
Traditional lenders see personal residences as the least risky and offer the lowest down payments on these Seattle mortgages. You may have to put down at least 10% for a second home. They may require at least 25% down on investment properties.
Note that there are exceptions to this. A few lenders only make loans to investors and may offer lower down payments.
There are also special loan programs for first time home buyers, which often offer great rates and low down payments. Key workers and first responders can often get special deals too. For example military veterans and their families can qualify for VA home loans, with no down payment and 100% financing.
Your Credit
One of the most obvious factors when asking “How much down payment do I need for a Seattle house?” is your credit.
What most home buyers don’t realize is that lenders aren’t just looking at your credit score. Some low down payment mortgage programs may require a 580, 620 or 720 credit score. In fact you may be surprised at how low your credit score can be, and still only have to make a 1% to 3.5% down payment.
However, lenders are underwriting your whole credit picture. They are looking at how well you manage debt, how much in debt and payments you’ve been successfully paying on time, how much available credit you have to make your house payments in an emergency, etc.
They look at the different types of credit you have, how long you’ve managed it well, and the amount of money others have trusted you with.
Unfortunately, there is a lot of misinformation and outdated information about fixing and improving your credit score out there. Some of it will do more damage than good. Especially, as credit scoring models are changing all the time. If you think you’d like to try and improve your score, first talk to a great Seattle mortgage broker to find out what will really help versus hurt you.
Debt & Income
How much are your monthly payments, versus your monthly income?
This debt to income ratio is a significant part of qualifying for a Seattle house loan. Lenders look at both how much of your monthly income you’ll spend on housing, and all of your bills together.
Changing Market Conditions
Down payment and loan qualification requirements are always changing. The state of the economy and housing market are the biggest influencers. In tough times lenders seem to be tougher, right when you want the most help. When you’re flush and the economy is good, they may be more generous.
For example, just two weeks into the 2020 COVID-19 pandemic, Chase announced it would only loan to borrowers with over 700 credit scores and was demanding much larger down payments. At the same time Wells Fargo stopped making home equity loans altogether.
So, if you find a home that works for you, and the rates are good, it’s smart to lock it in before things change on you.
- More Ways To Lower Your Down Payment
- Ask a friend or family member for a gift of equity of down payment help
- Have a family member cosign to make your application stronger
- Ask the seller to pay your closing costs
- Ask your mortgage broker about down payment assistance programs and grants
Talk to a loan officer and find out how to optimize your purchase and loan application for the lowest down payment, as well as the benefits of putting down more money if you can afford it.