How Much Home Can I Afford?

How much home can you afford in Seattle?

Washington State’s Snohomish and King County are very attractive destinations for home buyers. Not just for local residents and workers who finally want to stop renting and finally own their own place, or those looking to move up to homes from condos, but also professionals and families from all over the country and world who love the live style and community here.

Owning a home here can be a great investment. In many cases it may even be cheaper and more sustainable than renting. The big first question is “how much home can I afford?”

Without knowing this first, you can spend months looking at and dreaming about the wrong places. All leading to a lot of frustration and disappointment. Or it may mean settling for a lot less in a home than you could have afforded.

Let’s take a look at the factors involved, and how to figure out how much Seattle home you can afford…

What Do I Qualify For?​

The main factor for how much home most Seattle home buyers can afford is how much of a mortgage loan they qualify for.

There are 100% financing loans and jumbo mortgages available. It is really often about the loan amount at this stage. Though the rates and terms of the loan will also dictate the following factors as well.

How big of a loan you qualify for is a combination of factors, but credit and payment history can  be significant factors here.

Aside from the credit score itself, Seattle mortgage lenders and their underwriters are also looking at the length of your credit history, and how much debt and monthly payments you’ve proven you can handle in the past.

For example, if you’ve been living in Seattle and have been paying $2,000 or $3,000 a month in rent already for the past two years, you are a much better credit risk for a lender than someone trying to get a $700k loan to buy a home in Seattle, when moving from a $600 a month student rental studio in the Midwest.

Get pre-qualified for a home loan for free today and find out how much you can borrow.

How Much Cash Can You Afford?

Smart home buyers know that more importantly than how much they qualify, the decision of what to buy is how much they can comfortably afford.

Cash out of pocket is a substantial part of this. You may be fine with paying hundreds of thousands of dollars a month in rents, but be tight on cash on hand. Or vice versa.

How Much Down Payment Do I Need To Buy A Home In Seattle, WA?

You might not need any down payment at all. There are a variety of programs for first time home buyers which offer 100% financing, as well as low down payment home loans.

The best Seattle mortgage brokers will help you determine the optimal loan or combo of loans and down payment to get the best overall financing and house deal.

Just keep in mind that some loan programs and credit situations may require 5%, 10%, 20% down or more. Just don’t assume this is you until you get pre-qualified. You might be very pleasantly surprised at how little you need to put down.

Closing Costs

In addition to the down payment itself you will likely have some closing costs due at the time of closing. These can include lender fees, appraisals, home inspections, prepaid interest and taxes, home insurance, association dues, and title transfer costs.

Get an estimate from your mortgage broker and closing agent in advance. Ask about options for having the seller pay your closing costs and finance them to reduce the amount you have to put out of pocket.

Moving Costs

Don’t forget to calculate your moving costs too. This may be zero if you are just moving down the street with only a backpack, or your friends will loan you a truck to move your few things. Or it could be thousands of dollars if you are shipping an entire household of goods with white glove service from Hawaii or NYC.

Remember you’ll typically have to connect utilities too. This may only require transferring your internet, water and electric locally. Or you may need to put up new deposits of several hundred dollars.

Cash Reserves

Don’t spend your last penny on the down payment. You will want some cash reserves in the bank for emergencies. Depending on whether this is a personal residence or investment property, most lenders like to see 2-6 months of expenses in savings and other assets.

How Much Can I Afford In Monthly Payments?

Again, smart home buyers should be considering what they are comfortable with in terms of monthly housing payments. That may be less or more than you qualify for from a lender.

On most loan programs lenders will qualify you based upon your debt-to-income ratio (DTI). This is the percentage of your income used to cover your monthly housing and total debt payments.

Lenders are only really looking at your PITI. That is your monthly Principal, Interest, Taxes and Insurance mortgage payment.

However, as a smart home buyer you want to take into account all of your other housing related costs too. This may include:

• Condo or association fees
• Special assessments from an association
• Maintenance
• Utilities
  

It is also wise to factor in inflation and changing interest rates if you are choosing an adjustable rate mortgage over a fixed rate mortgage.

Give yourself slack in tough years, and the ability to pay off your loan faster in good years if you choose to.

How much home can you afford? Get pre-approved and start searching for your perfect place in Seattle today...