The Millennial generation is the biggest in U.S. history. It's also the generation with the most debt. As a result, many young interested home-buyers can't even afford their down payment.
If you're in this bracket, you don't have to worry about this any longer. You just need a source that you can trust.
Don't wait for your dreams to pass you by. If you're interested, keep reading for the knowledge you need to make an efficient house down payment.
How much down payment do you need to buy a house in Seattle?
Down payments can be one of the most daunting and confusing parts of buying a home. So, how much do you really need? What low down payment options may be available?
A Fair House Down Payment in Seattle
Most estimates predict 20% down payments will get you into the house you're looking for. For context, if the house you're looking for is $700,000, then you'd have to put $140,000 down.
For most people, especially younger people looking to buy a home, $140,000 is the cost of two US college degrees.
Down payments are continuously one of the top reasons given for not buying a home.
Many don’t even give home buying a try because they have fallen for the myth that they need a giant down payment. Instead they continue to throw away many years of hard work and earnings on rent to pay for someone else to own a home and earn money to support their lifestyle and retirement.
There can be benefits of making a sizable down payment. That might include lower interest rates, no PMI, fewer fees, and sustainability and financial flexibility.
However, putting off homeownership because you haven’t explored your down payment options yet can be far more expensive.
You may not need nearly as much as you think.
It's important to look at more than the housing price on paper before moving in, you can still put down affordable down payments in the Seattle area (as little as 3.5%).
What Determines Your Down Payment
There are a variety of factors which can influence your down payment.
Market Changes
Down payment requirements chance over time. Just as do underwriting rules and interest rates.
This can depend on the wider economic, health of the housing market, mortgage default rates, and housing policies and experiments in place by the government.
Credit
Stronger credit scores and histories typically lead to lower down payment requirements, but not always.
The Property
Some properties are considered higher or lower risks by different lenders. The less risky, the lower the down payment needed, and vice versa.
For example, some lenders see condos, and especially non-warrantable condos as riskier and require larger down payments on those. The same can apply to properties needing significant repairs.
The Loan Amount
Conforming loan limits are extended to over $800,000 for Seattle area home buyers. Those needing to borrow more may require jumbo mortgage loans, and larger down payments.
Loan Purpose
Primary residences typically offer the lowest down payments, followed by second homes and investments properties which require the most down payment.
Lenders
Different lenders have different requirements. Some may require at least 20% down. Others may offer zero down loans. A mortgage broker can be the best way to find the right fitting lender right away, without wasting months of shopping or damaging your credit.
Choice
It often comes down to choice. If interest rates are low and you want to keep as much cash on hand as possible, then making a lower down payment may be the best move. Whereas if you have too much cash, and want to keep your monthly payments lower you may want to make larger down payment.
Down Payment Assistance
Just because you need to make a down payment doesn’t mean it all has to come from your own pocket. It could also come from down payment assistance programs, local grant programs, or gifts from friends and family. You may even be able to leverage your 401k or IRA into a down payment.
Loan Programs
Different loan programs have different down payment scales.
Money and You
You ask yourself, "how much down payment do I need in a house?" The fact is, the median cost for a down payment has reached close to $100,000 in Seattle.
There isn't a magic reason behind this, the change in down payment cost depends largely on the increase of property value in Seattle. It's a simple equation, the more people that arrive in Seattle and the fewer homes that are available, prices go up and the more money home-owners have to spend on a down payment.
The amount of money you put down decides how much you'll take out on a loan. Your payment not only decides how you can pay but the amount you'll have to spend. Therefore, it's a good idea to look for programs that enable you to put down more money faster.
Programs and Payment Options
There are many programs for low-income adults and families. Moreover, veterans programs and rural-grants can put you more at ease. Here's how to check if you qualify for any of these payment options.
FHA loans can get your down payment to 3.5%. You can also get accepted with low-credit when choosing FHA. FHA sometimes puts a burden on young home-starters later down the line because of the upfront insurance cost of 1.75% that is added onto the back of the loan.
Finding a local Seattle mortgage broker can increase your odds of finding state-supported strategies for lowering your DP. If that isn't your first choice, you can consider shopping around until you find a cheap home.
We have options for as little as 3% down, for as much as a $1.5M purchase. To set up a time to discuss low down payment options with a specialist, over the phone, Click Here.
Ways to Afford Your Down Payment
If you’re wondering how you’re going to be able to afford even 5% down, you might want to consider down payment assistance.
Down Payment Assistance
There are many options out there. From grants to lender-offered assistance, assistance doesn't have to come in the form of a loan. Some great forms of assistance are as follows:
- Grants
- DPA Loans
- VA Loan
- USDA Loans
Let's look at these couple options in case you need the extra hand.
Grants
You can think of a grant as a sum of cash the government or other not for profit gives those in particular cases. Yours might depend on education, financial background, or some sort of artistic pursuit. Despite the reason, a grant can go towards your down payment to help with or cover the total cost.
You'll want to find a grant that fits your demographic and region. Moreover, it's important to look for funds that aren't disguising themselves as grants. To avoid this, do plenty of research on the grant you're studying.
Lastly, be sure to check application deadlines for any grant you apply for. Many grants run year long but may not overlap with other commitments you have lined up.
Low Cost Down Payment Assistance Loans
There are state and local down payment assistance programs which are easy to apply for, have low interest rates, and may have no payments, or may be forgiven if you continue to live in the home as your own residence.
Check out these links and explore your options, or call your mortgage broker today and they can help advise you on the best options.
The VA Loan
The VA loan is a no down payment loan option that the US Military offers almost all military veterans. In short, you'll need to have some service under your belt. After that, you'll want to find a VA lender.
You can get quotes from veteran loan companies, despite the cost and your situation. However, you won't always get a deal that outweighs one offered by a different service or broker.
You'll need to be pre approved before moving forward. This process relies on a lenders understanding of your military background and current income. If you're a disabled veteran, you will have your funding fee waived.
Why is this a good option? For one, the VA loan is reusable. That means you can use this loan for several assets at a single time and still have opportunity left over. The only stipulation is that you pay off your loan each time by refinancing into a regular loan before using the VA loan again.
USDA Loans
The United States Department Of Agriculture also provides 100% financing and zero down payment home loans through qualified local Seattle mortgage brokers and lenders.
Why You Don't Have to Spend 20%
The 20% rule is a middle-ground number for most potential homeowners. You don't have to settle with a high percentage of the cost of your home. Instead, you can find a way to pay between 3-10%, or even less.
As stated earlier, your lender will be a deciding factor between you and cheaper down payments. Before you try negotiating a lower fraction of the total cost, try looking at your credit history and current income. This is likely to sway your lender to allow a lower down payment. If you can quickly increase your credit score then the loan should automatically become cheaper.
Advantages of Lower Rates
If you can swing less than 20% you'll have a lot less on your plate financially, and more money to invest in your home later on. It's not just about money though, in some cases you may find that the place you found isn't the home of your dreams. After all, it might be the first home you've put money into.
If that's the case, mortgages are the cheapest way to borrow money so a lower down payment will leave you with more available cash for the next purchase. Be sure to check with your broker about this to see what your standing is after putting down a payment.
Other Expenses When Buying A Home
Don’t forget that your down payment can just be a part of the cash you’ll need to buy your home.
Other expenses to budget for include:
- Closing costs
- Inspections, appraisals and due diligence
- Insurance
- Prorated escrows
- Moving costs
- Turning utilities on
- Furnishings and improvements
- Budgeting for your housewarming party
Find The Right Home for You
You no longer have to wait for the same options again and again. You can find a lender that cares and wants to get you into the home of your dreams. All you need is a good sense of trust and know the direction you plan on traveling.
With rising home prices, finding a down payment can be hard. That's why you need a lender that's willing to lend a hand. What could be better than starting that process today?
It's your turn to take some action for your future. The Seattle area is beautiful and worth working for. All you need is a mortgage broker you can trust. Don't wait for the house you want to be taken, choose a broker you can trust to lower your down payment!