How much do you need for a mortgage down payment in Seattle?

Do you really need as much as you think to qualify for a mortgage and to make a down payment? Seattle isn’t the cheapest place in the world to buy a home by a long way. Yet, there may be more options out there that can help you cut the costs. So much much do you need to save before even thinking about buying a home?

Down payment is by far the most common reason many renters say they haven’t even tried to buy a home. It’s true that many people haven’t really save much at all. Only around 10% of millennials have saved at least $10,000 toward a down payment. That’s less than 10% of a standard down payment on the average priced home in Seattle. However, it’s also true that you’ll probably never be able to save up enough fast enough while renting in Seattle. So, unless you’re prepared to move out to the midwest or Mexico or live in a tent for a few years, this may be your best chance to break this cycle.

Here’s what you need to know about mortgages, down payments and Seattle home buying.

The Myth Of The 20% Down Payment

The big mental roadblock that robs many of the dream of homeownership is thinking they need the notorious 20% down payment to get a mortgage and buy a home. That’s simply not true.

Yes, during the great recession more lenders became increasingly demanding about down payments. Yet, even then there were lower down payment programs available. Even on conventional mortgages as little as a 3% down payment is possible.

There can be benefits of putting down a slightly larger mortgage down payment in Seattle than necessary.

This includes:

  • Avoiding the cost of mortgage insurance (MI)
  • Easier underwriting
  • Easier to qualify for a mortgage with lower debt-to-income (DTI) ratios

There are downsides too. Such as leaving yourself cash poor and putting that equity at risk.

Why Do People Pay Cash For Houses?

Some people may need or want to put down a larger down payment when getting a mortgage in Seattle.

  • Common reasons for this include:
  • Low credit scores and hard to prove income
  • High debt to income ratios
  • Buying investment property
  • Buying deeply distressed or structurally unsound properties
  • Hard to finance properties like condotels and mixed use properties

In these cases you may need to put down a 30% down payment, but not always.

Others believe there are advantages of paying cash, only to regret it later. Some think they can pay cash for speed or to make their purchase offer more attractive to sellers, and then simply refinance later on. Be careful. It isn’t always that simple.

Some see this as a way to reduce the cost of buying and borrowing, and have so much money they aren’t sure where to hide it. Only this strips them of tax benefits, and leaves them exposed to great risks. The truly wealthy always take out mortgages to protect themselves.

Down Payment Help

You don’t have to come up with your whole down payment yourself. In fact, Washington State has many down payment assistance programs. These include grants for down payments, and special funding for closing costs and home improvements. If you really want to save check out these free money opportunities.

Low Down Payment Loan Programs

There are still several great low mortgage down payment programs in Seattle. This includes FHA loans with down payments as low as 3.5%. That’s a huge difference if you thought you needed 20% or even 10% down to buy a home.

If you can find a home in a great Seattle suburb for $400,000, that means you may only need a $14,000 down payment. That’s not much more than it is going to cost moving into many rentals. Plus you get to own it!

Of course, there can be pros and cons to these loan programs too. They can require mortgage insurance. That may be paid at closing, monthly, or both. Borrowing more money can make your payment a little higher too. Yet, by maximizing your leverage, you can always choose to pay down your loan earlier if you are flush, or not when times are tight.

100% Financing For Homes In Seattle

Yes, there are even 100% financing, no down payment loan programs for you in Seattle. This includes USDA home loans and VA home loans. They have pretty lenient underwriting guidelines too. So, if you are tight on cash, but are tired of wasting money on rent, you should definitely ask your mortgage broker about these loans.

Other Costs Of Buying A Home

When it comes to deciding on a down payment, don’t forget your other costs. Don’t put down so much that you can’t turn around and make your first mortgage payment or celebrate your move.

In addition to the down payment you may need to cover:

  • Closing costs
  • Inspections
  • Moving
  • Turning on utilities
  • Decorating and making improvements

Save a little to explore your new neighborhood and still have a life too.

When To Make The Move

Renting is just throwing away money. Actually, it is just paying for someone else’s retirement and lifestyle and to keep growing equity in that property. The sooner you can make the leap the better. You can try to forecast the perfect moment when interest rates are low, house prices are softer, and mortgages are easier to get. That’s really hard to do. So, as soon as you can swing it, get preapproved for a home loan and find out what you can qualify to buy.

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.