What Down Payment Do I Need for a House?

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

The exact amount of cash you’ll need as a down payment and to bring to closing on the home of your choosing will depend on a variety of factors. Keep reading and you might be surprised at just how little you need to buy a house in Seattle, WA.

Forget the cliche 20% down payment. You might be able to get into a new home for just 3% down, or even much less.

How Much Down Payment Do I Need For A House?

Here are the factors that you need to know which can determine just how little, or how much of a down payment you need to make.

Your Credit

You might actually be surprised at how low of a credit score you can have, and still qualify for a low down payment home loan.

This changes over time, but even with a credit score in the low 600s or high 500s, you may still be able to put down 3.5% of the purchase price, or less.

Of course, in general, the better your credit, the more lenders will want to loan you.

It is also important to realize that your credit is more than just your score. Lenders also look at the length of your credit history, amount of debt you are comfortable handling, the types of debt you’ve managed before, and more.

Talk to Seattle’s best mortgage broker to get more personalized advice on how to optimize your credit to get the best home loan.

The Property

The property itself can play a role in how much down payment you need to buy a house too.

More suburban and rural properties can qualify for USDA loans. These loans offer up to 100% financing, with no down payment required. There can even be some sweet spots which seem quite urban that still qualify too.

On the other end of the spectrum, those needing jumbo mortgages, or who are buying non-warrantable condos may need to put down more money.

Intended Purpose

What is your intention for this property?

Will it be a personal residence? A second or vacation home? Or an investment property?

Second homes are seen as a higher risk by lenders. They know that in hard times you’ll probably stop paying on your vacation property a lot sooner than on the home you live in.

For this reason, second homes and investment properties often require higher down payments. This could be between 10% and 25%.

You

If this is your first home, or the first one you will have bought and owned in several years, you could qualify for first time home buyer programs that come with even lower down payments.

Military veterans and their families can also qualify for special programs, like VA loans. These also offer 100% financing, with no down payment required.

What Help Can You Get

Even with some of these other factors working against you, you might find extra help that can dramatically reduce how much cash you need to buy a home in Seattle.

Friends and family members could become your cosigners. They can often gift you down payments. Or if you buy a home from them, they can make a gift of equity in place of a down payment.

There are also local down payment assistance programs and grants which can give you the money you need for a down payment. In many cases it never needs to be repaid.

Today, many Seattle Realtors are offering rebates to home buyers. These cash rebates can often be used towards any money you need for closing. Or use it to help you move and furnish your new place.

Seller contributions are quite common too. Most loan programs allow them. When making your purchase offer, ask the seller to contribute towards your closing costs. This can often be 3% to 6% of the sales price of the home. It will dramatically reduce the amount of cash you thought you needed.

Debt-To-Income Ratios

Your debt to income ratios will also determine how much you can borrow.

If you have a high amount of other monthly payments (credit cards, car loans, etc.) that may mean you have to keep your loan amount down.

Current interest rates will play a factor in how much your housing payment is compared to your monthly income. So, buying a home when rates are low can help you get a higher LTV loan.

How much income you can actually verify may be a factor. This is especially true if you are self-employed, and declare very little income on your tax returns.

How Low Do You Want Your House Payment To Be?

If you are more concerned about securing low monthly payments for the long term, then you may actually want to make a larger down payment.

The less you borrow, the lower your payment will be. This can also help to eliminate mortgage insurance, and reduce homeowners insurance premiums.

Opting to pay points at closing will also reduce your interest rate and payments for the long term.

Compensating Factors

Other compensating factors, or a lack of them can impact how much money you need to put down.

A very strong credit score, having many years in a stable high paying job, lots of cash assets in the bank, and equity in other properties can all help make you a stronger borrower and lower credit risk.

The opposite can also be true.

Market Conditions

Just like everything else, the mortgage market is constantly changing. There are times when mortgage lenders are much more lenient and eager to make high loan-to-value loans. At other times they are more conservative and want larger down payments.

The Lender

Individual banks and lenders all have their own criteria. Some are notoriously conservative and will be even tougher than they need to be. Working with a top Seattle mortgage broker will give you a full view of all of these options before applying. They will help you understand the best loan programs, and who is happily handing out low down payment loans.