What’s the average down payment on a house in Washington State? That partly depends on the type of home loan you’re using.
According to a recent report from a mortgage software company, the average down payment on a house ranges from 4% (for FHA loans) to 20% (for conventional). Borrowers using the VA mortgage program put even less money down, on average.
Average Down Payment on a House in Washington State
Ellie Mae is a leading provider of mortgage origination software for the lending industry. Their software is used to process many thousands of home loans every month. Each month, the company publishes an “Origination Insight Report” (OIR) based on a “robust sampling of closed loan applications.” The OIR gives us some good insight into various lending trends, including down payments.
Among other things, the OIR lists average loan-to-value (LTV) ratios for closed loans. The LTV is essentially the inverse of the down payment. For instance, if a borrower obtains a loan for 80% of the home purchase price, they’ll have to make a down payment of 20%. The LTV is 80% — the down payment is 20%.
The latest Origination Insight Report contained data through the end of September of 2016. It gives us some insight into the average down payment on a house within Washington State, and elsewhere across the country.
Here are the average loan-to-value ratios by mortgage type:
- Average LTV for all closed loans during September: 78%
- Average LTV for FHA purchase loans: 96%
- Average LTV for conventional purchase loans: 80%
- Average LTV for VA-guaranteed loans: 98%
Conventional Loan Down Payments
It would appear that the average down payment on a house is 20%, when a conventional home is being used. “Conventional” means the loan is not backed by the government, which distinguishes it from FHA and VA.
It’s important to note, however, that a 20% down payment is not required for conventional loans. Home buyers in Washington State can qualify for conventional financing with a down payment as low as 3% of the purchase price. The LTV numbers above are just averages — not minimums.
FHA Loan Down Payments
According to the latest OIR, the average down payment among home buyers using the FHA loan program was 4%. That’s not surprising, since borrowers are required to put down at least 3.5% when using FHA loans to buy a house.
VA Loan Down Payments
The Veterans Administration (VA) home loan program offers 100% financing for eligible borrowers in Washington State. This allows borrowers to buy a home with no down payment whatsoever, and often without mortgage insurance.
Despite the 100% financing that’s available through this program, some borrowers choose to make down payments to reduce their mortgage amounts. The average amount put down on a VA home loan is around 2%, based on the Ellie Mae LTV data from September.
Loan-to-Value and Mortgage Insurance
When a mortgage loan accounts for more than 80% of the home value, the borrower is usually required to pay mortgage insurance.
Almost all borrowers who use the FHA loan program end up paying mortgage insurance premiums, which can increase the monthly payment. Additionally, most conventional home loans with an LTV above 80% require private mortgage insurance (PMI).
The VA program is unique in this regard. Home buyers who use a VA loan to buy a house could qualify for 100% financing without having to pay mortgage insurance.
The point is, if you make a down payment of less than 20% on a home in Washington State, there’s a good chance you’ll have to pay mortgage insurance. The upside is that this insurance allows you to qualify for a loan with a smaller down payment, which might not be possible otherwise.
Ready to Move Forward?
Are you planning to buy a house in Washington State sometime soon? Have questions about down payments, mortgage insurance, or loan programs? Give us a call. Sammamish Mortgage has been helping borrowers across the Pacific Northwest for more than 20 years.