Summary: Are you planning to buy your first home in Seattle in 2020? Do you want to minimize your down payment expense? Give the FHA loan program a look.
In a previous blog post, we wrote about the increasing number of millennials who are buying homes, and how many of them are using FHA loans to finance their purchases.
This mortgage program is particularly popular among first-time home buyers in Seattle. That’s because it offers a low down payment that is well suited to borrowers with limited funds, which is often the case for first-time buyers. It’s also great for borrowers who have credit scores that aren’t as high as they need to be for conventional loans.
But is it right for you? Here are some things you should know about buying your first home in Seattle with an FHA mortgage loan.
Helping Home Buyers Since the 1930s
The Federal Housing Administration’s home loan program was created in the 1930s, in response to the Great Depression. Today, it serves much the same purpose as it did at its inception. It supports homeownership by making mortgage loans more affordable for a larger group of Americans.
The FHA loan program benefits borrowers by insuring mortgages that are originated by lenders in the private sector. This insurance reduces risk for the lender, which in turn makes mortgage financing available to people who might not otherwise qualify for a loan.
Using an FHA Loan to Buy Your First Home in Seattle
As a first-time home buyer in the Seattle area, you have quite a few mortgage options available to you. We’ve summarized them here. FHA-insured home loans are one of those options, and they are particularly popular among first-time buyers with limited funds saved for a down payment.
Here are 6 things you should know about this program:
- When using an FHA mortgage loan to buy a house in Seattle, you’ll have to make a down payment of at least 3.5%. That’s 3.5% of the purchase price or the appraised value, whichever is less.
- In order to qualify for the 3.5% down payment option above, you’ll need a minimum “decision credit score” of 580 or higher. This requirement was established by the Department of Housing and Urban Development (HUD), which oversees the FHA program. Learn more about these credit score requirements.
- As a result of the low down payment, Seattle first-time home buyers who use FHA loans usually have to pay mortgage insurance. These premiums will increase the size of your monthly payment. But it’s a trade-off: mortgage insurance increases your borrowing costs, but it also allows you to make a lower down payment on the loan.
- There are limits to how much you can borrow under this program. These “loan limits” are based on median home prices, and they vary from one county to the next. For a first-time home buyer in Seattle, the 2020 FHA loan limit is $741,750. This applies to King, Pierce and Snohomish counties.
- The home you are purchasing must undergo an appraisal, and it must meet HUD’s minimum property requirements. Most of these requirements relate to the health and safety of the occupant. In fact, “health and safety” is a recurring phrase in the FHA loan handbook. Learn more about these inspections.
- FHA loans are assumable. This means that if you sell the home down the road, the new buyer could essentially take over your monthly mortgage payments (assuming they meet the basic eligibility requirements). This could help you market the home to attract buyers, which is another benefit of using the FHA program.
Let’s Talk About Your Mortgage Options
FHA loans are a popular financing option for people buying a first home in Seattle. This article gives you a basic overview of how the program works, and how it might benefit you as a first-time buyer. But there’s more to learn.
We’ve created a number of tutorials relating to the FHA loan program (see below). We can also answer any questions you have about using this type of mortgage to buy your first home. Please contact us with your financing-related questions.
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Need a Home Loan in Seattle?
Will you need mortgage financing to buy a home in Seattle? We can help. Sammamish Mortgage has been serving buyers across the Pacific Northwest for about years and we’d love to help you. We offer a wide variety of mortgage programs with flexible qualification criteria to borrowers in WA, OR, ID, and CO. Please contact us today with any financing-related questions you have.