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Last updated: 17 August 2023

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.

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 SeattleGraph of changes in home prices in Seattle within 3 years

Most estimates suggest that an average down payment of 20% will get you the house that you want. For context, if the house you’re intending to buy has a purchase price of $700,000, then you’d have to put $140,000 down. In 2023, the median home sold price was $826,000, which means that a downpayment of $165,200 is needed to fulfill the 20% average.

For most people, especially younger people looking to buy a home, that amount of money is the cost of two US college degrees.

Whenever young people are asked why they haven’t bought a home yet, the reason that is most often given is that they simply cannot afford the down payment. This has been true for many years now.

In fact, so many don’t even bother looking into the feasibility of buying a home because they’ve subscribed to the myth that in order to buy a home, they’ll need hundreds of thousands in cash to put down as a down payment. Instead, they continue to throw away many years of hard work and earnings on rent to pay for someone else’s mortgage and to support their lifestyle and retirement. 

Although there can be benefits to making a sizable down payment, these include lower interest rates, no mortgage insurance, fewer fees, and sustainability and financial flexibility, putting off homeownership because you haven’t explored your down payment options yet can be far more expensive.

The truth is that you may not need nearly as much as you think.

It’s important to look at more than the housing price on paper before throwing out the thought of home ownership. There are various ways to put down a much smaller down payment towards buying a home in the Seattle area (as little as 3.5%).

Image of a house in Seattle

What Determines Your Down Payment

There are a variety of factors that can influence your typical down payment.

Market Changes

Down payment requirements change over time, just as underwriting rules and interest rates do.

This can depend on the wider economy, health of the housing market, mortgage default rates, and housing policies and experiments that have been put in place by the government. 

Credit Report

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 or larger down payments.

Loan Purpose

Primary residences typically offer the lowest down payments, followed by second homes and investments properties, which require the highest down payment. 

Lenders

Different lenders have different requirements. Some may require at least 20% down while others may offer zero down loans. A mortgage broker can be the best way to find the most suitable lender right away, without wasting months of shopping, damaging your credit score in the process. 

Choice 

If the current interest rate is low and you want to keep as much cash on hand as possible, then making a lower down payment may be the best move. On the other hand, if you have a lot of cash and want to keep your monthly payments lower, you may want to make a 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

Image of Seattle skyline

The most important question of everyone’s mind is, “how much down payment do I need to buy a house?” 

The fact is, in Seattle, the median cost for a down payment has reached close to $100,000.

There isn’t a magic reason behind this, the upward trend in down payment cost depends largely on the increase of property value in Seattle. The average home price in Seattle has been skyrocketing in recent years, and it’s a simple equation. The more people that arrive in Seattle and the fewer homes that are available, the more prices go up and the more money homeowners have to spend on a down payment.

The amount of money you put down dictates how much you’ll take out on a home 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. There are also veteran programs and rural-grants that 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 an FHA loan. An FHA loan 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 down payment. If that isn’t your first choice, you can consider shopping around until you find a cheaper 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

List of down payment assistance options

There are many options out there, from grants to lender-offered assistance. Assistance doesn’t always 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 all these options in case you need the extra hand.

Grants

You can think of a grant as a sum of cash the government or another not-for-profit extend to those in certain situations. These factors might depend on education, financial background, or some sort of artistic pursuit. Whatever the reason, a grant can contribute 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. Additionally, it’s important to look for funds that aren’t disguising themselves as grants. To avoid this, do plenty of research on the grant that you’re planning to apply for.

Lastly, be sure to check application deadlines for any grant you’re looking into. Many grants run all year long, but may overlap with other commitments that 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 primary residence. 

Check out these links to explore your options, or call your mortgage broker today and they can help advise you on the best selection for your unique situation.

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, regardless of the cost and your situation. Take note though, that you may not 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 lender’s 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. With a good credit history and higher income, you’re more 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 Mortgage 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

Image showing other expenses when buying a home

Don’t forget that the down payment is only a part of the cash that 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

Don’t let the home ownership boat sail by when you can find a lender that cares and wants to get you into the home of your dreams. As first time buyers, all you need is a good idea of what you are looking for, trust and know the direction you plan on traveling towards.

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 time to start taking a step into securing your future. The Seattle area is extremely desirable, precisely because of the beautiful views of the ocean and mountains, and the close proximity of a major metropolitan area to an unlimited variety of outdoor activities. All you need is a mortgage broker you can trust to help you finance your first home. Don’t wait for the house of your dreams to be snatched up, choose a broker you can trust to lower your down payment! 

About the Author

Helping Seattleites buy their dream homes for over 15 years. Founder of Seattle's Mortgage Broker and author of Homeownership Simplified: The Truth about ZERO Down.