Your Seattle Down Payment Guide - Seattle Mortgage Planners

Ready to buy a home in Seattle, but need a Seattle down payment guide?

It’s completely understandable why you’d want to be at the heart of the Emerald City. There’s so much to do and see. Plus, it’s a great place to raise a family. You can’t beat the food, and the coffee world is continuously on the move.

You may have secured a new job, recently got married, or are simply on the hunt for a new home in the Seattle area. You’re itching to make a move, but are you prepared to put money down to secure your home? The truth is, new listings in Seattle spend an average of 10 days on the market. This means the market is more than hot and competition is more intense than in previous years.

Read through our guide for more information on Seattle’s housing market and what a typical down payment in Seattle looks like.

What First-Time Buyers in Seattle Need to Know

As stated before, the Seattle housing market is packed with buyers who are willing to go to extreme lengths to secure their home. But there’s no need to panic. Whether you have a lot in savings or need alternative options, we have information you can use to prepare for what’s to come.

Typical Down Payment in Seattle

According to a recent article by Seattle P-I, the typical down payment in Seattle is about $130,829. This total is based on a 20% down payment for your average home in the area.

While the average income in Seattle is fairly high in comparison to the rest of the U.S. at $102,535, the average home price is nearly six times that at $654,147.

How Does Seattle Compare to National Down Payment Amounts?

With the average price of a home in the U.S. coming out to $408,800, most Americans put down about 6% on a home. This comes out to $24,528 for the average home in the U.S. on a 30-year mortgage plan.

It may not seem fair, but the national average does take into account extremely expensive markets like California, Arizona, and Michigan, as well as less expensive housing markets like West Virginia, Mississippi, and Oklahoma.

Typical down payments in Seattle, even at a 20% down payment rate, lie nearly $20,000 over the national average. These clearly stand out as being one of the most expensive housing markets in the entire U.S.

Why Are Seattle Down Payments So High?

Seattle isn’t alone in the increasing amount of home buyers who are on the hunt. However, it is unique because it is so pricey. But there are several reasons Seattle has always been a hot spot for high-priced housing.

High Cost of Living

The cost of living is a lot higher in the Seattle area. The average household income is close to $100,000. However, individuals making more than six figures are more likely to be able to purchase a house within city limits.

Housing Shortage

Again, there’s a huge influx of professionals starting at some of the world’s top companies like Amazon, Starbucks, and Costco. Because there is a pool of people with high-paying positions and who are able to put down the maximum payment, houses get snatched up quickly.

Zoning also places an effect on houses available for purchase. It’s both dense and small. Single-family homes are restricted to a zoning area that is approximately 6% of the city. As you can see, space is hugely limited and there are simply not enough homes to go around.

The Effects of COVID-19

Pre-pandemic, Seattle’s housing market sat at $462,800 on average for a home. But with the increasing number of buyers out there, the price keeps going up.

It’s not just buyers who are making a difference in the housing market. Because of the pandemic, many people have lost their jobs and can no longer afford to live in the city. Therefore, sellers are moving out and giving up their city-based homes for more affordable living outside of Seattle and even outside of Washington.

In addition to those looking for more affordable options, COVID-19 has caused people to pause and rethink city living. On top of looking to make quite a bit more than their asking price, people are looking for additional space and room to breathe.

Finally, there’s been an increase in people who permanently work from home. This offers more options for people to get more for their money or simply work elsewhere.

Other Information You Need to Know as a First-Time Buyer

No matter what type of home you’re searching for, there will always be a minimum down payment requirement. But keep in mind that placing down the minimum means you’ll be paying more with interest and fees for as long as your loan term runs.

Putting down a smaller amount upfront could also mean that you have more leftover for closing costs — not to mention other expenses associated with buying your first home.

Does It Make Sense to Put 20% Down in Seattle?

Placing 20% down is a huge undertaking and could offer some benefits. However, it may not be necessary.

For starters, unless you have a ton of money in the bank, it could take you years to save up enough to hit the 20% goal. Even a couple who makes a decent combined salary could need an extra few years on a tight budget with $50,000 already in savings.

In the time it takes to save up, the opportunity for savings such as not having to pay mortgage insurance could pass. You also want to keep in mind that the average home price could continue to appreciate over time. This means you’d need to save up even more money to afford the home of your dreams.

Alternative Down Payment Options

You may feel like you can’t afford to live in Seattle at all. But there are some alternative options out there aside from putting down 20% on a home.

Low and No Down Payment Options

VA Loan

You may be able to look into a VA loan if you or your spouse is a member of the U.S. military. It can offer several benefits such as 100% financing, no required down payment or mortgage insurance, flexible credit requirements, payment assistance, and more.

USDA Loan

The U.S. Department of Agriculture’s (USDA’s) Loan can also offer benefits such as 100% financing, low mortgages, and insurance premium rates. You may even be able to get assistance in financing home improvements and repairs.

FHA Loan

The Federal Housing Administration (FHA) Loan requires a small down payment of 3.5% and is largely used because of its numerous benefits. Some of those benefits include lenient credit standards, lower mortgage rates, and varied amounts of fixed-rate mortgage options.

HomeReady™ Mortgage

Fannie Mae supports this mortgage plan, allowing a small down payment of 3%. Its other advantages include being able to pool your money to meet larger income requirements, lower mortgage and mortgage insurance premium rates, and the ability to get the loan even with no credit history available.

Conventional 97

This type of loan is ideal for people who aren’t able to or don’t want to place down a large amount of money for a home but otherwise qualify for a traditional loan. However, this option limits buyers to a 30-year fixed-rate mortgage rather than a 15-year conventional one.

Piggyback Loan

A piggyback loan, also called an 80/80/10, could work if you have 10% that you’re able to put down. Using this loan, you’ll typically be given a loan for about 80% of the home’s price. Then, you’ll receive a second loan for 10%. The last 10% is made up by your initial down payment.

Down Payment Gifts

A down payment gift is exactly how it sounds. It can be any amount that family members (usually parents) give in order to help someone buy a home. However, it takes more than simply transferring a large sum of money from one account to another.

An underwriter will be looking out for large amounts of money or checks made out that appear to be a down payment gift. This is because while you may have been given a large amount of money to work with, lenders want to make sure that you’re able to afford your home based on your actual income. Lenders need to carefully document and declare gifts in the form of a down payment.

[Related: Guide to Down Payment Gifts]

Seattle Mortgage Planners Is Here to Help

Thinking of buying a home in Seattle? Reach out to us to discuss your options with an experienced mortgage professional. There’s no need to put a complete hold on your home-buying plans — contact us to learn how you can make your dream of buying a home in Seattle a reality!