No, you do not always need 20% down to buy a home in Seattle. In many cases, buyers can put less down and still qualify for financing. The real question is whether a smaller down payment or a full 20% down payment makes more sense for your budget, cash reserves, mortgage insurance costs, and overall financial priorities in Washington.
A 20% down payment can help in some situations, but it is not a universal requirement. Putting 20% down usually means borrowing less and avoiding mortgage insurance on many conventional loans. But putting less down may be the better choice if you want to preserve cash for reserves, closing costs, repairs, or other financial goals.
When a lender makes a loan for more than 80% of the home’s value, they’ll require some form of mortgage insurance to limit their risk. The cost of mortgage insurance depends on the loan to value ratio and the borrower’s credit score.
Related: A guide to Private Mortgage Insurance (PMI)
Putting 20% down may make sense if your priority is keeping the monthly payment lower and avoiding mortgage insurance on many conventional loans. A larger down payment also reduces the loan amount, which can improve payment comfort over time.
For some buyers, that payment reduction is worth using more cash up front. If you expect to stay in the home for a long time and feel comfortable using a larger share of your savings for the purchase, 20% down may be a practical strategy.
Putting less down can also be a smart choice. A smaller down payment may leave you with more cash available after closing, which can matter if you want to maintain reserves or expect other homeownership costs.
There may also be times when making a smaller down payment makes sense even when a buyer has the cash available for a 20% down payment. Anyone who is carrying expensive consumer debt, such as credit cards and car loans, may benefit from using some of their available cash to pay off that debt instead of using it for the down payment.
It is possible to make a small down payment and structure mortgage insurance in different ways. In some cases, buyers may pay monthly mortgage insurance. In others, paying a single premium at close of escrow may satisfy the lender’s requirements. Just as with monthly insurance, the cost varies according to credit score and loan to value ratio.
A single-premium option may sometimes be added to the loan so the borrower does not have to pay it out of pocket.
The main tradeoff is straightforward: a lower down payment may help you keep more cash, but it can also increase your loan amount and add mortgage insurance costs. That is why it is important to compare the full monthly payment, not just the amount needed at closing.
Use these questions to compare your options:
The cost of monthly mortgage insurance and a larger mortgage could be more than offset by the elimination of other monthly debt payments.
Mortgage insurance for conventional loans is not always a permanent expense. Once the loan balance reaches 80% of the home’s value, the homeowner can ask the lender to drop the requirement. Different lenders have their own procedures for doing this, but it typically involves paying for an appraisal to document the home’s market value.
Because the cost of mortgage insurance is indexed to the borrower’s credit score, it may be possible to reduce the cost with even a minor improvement in the credit score. A buyer with a credit score of, say, 735 could save money by raising their score just five points, to 740.
Finding the additional points could be as simple as paying down the balance on a credit card by a few hundred dollars.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
No. Many buyers in Seattle can qualify with less than 20% down. The main tradeoff is that a smaller down payment often means a larger loan amount and some form of mortgage insurance, while 20% down can lower the payment and help avoid mortgage insurance on many conventional loans.
Not necessarily. Putting less than 20% down can be a reasonable choice if keeping cash for reserves, closing costs, repairs, moving expenses, or other financial priorities matters more than avoiding mortgage insurance.
The minimum down payment depends on the loan program and borrower qualifications. This is not a one-size-fits-all number. Many buyers in Washington can buy with less than 20% down, so the best option depends on loan type, credit profile, cash reserves, and overall finances.
Sometimes. When buyers put less than 20% down, lenders usually require some form of mortgage insurance, but the structure can vary. In some cases it is paid monthly, and in others a single premium at closing may satisfy the requirement.
A 20% down payment may make more sense when the goal is to keep the monthly payment lower, avoid mortgage insurance on many conventional loans, and reduce the total amount borrowed. It can also be a practical strategy for buyers who expect to stay in the home for a long time and feel comfortable using more cash up front.
A lower down payment may be better when preserving cash is important. Keeping more money after closing can help with reserves, repairs, moving costs, or unexpected expenses. It may also make sense if available cash could be used to pay off higher-interest debt instead.
It can be. Keeping cash reserves may provide more flexibility after closing and help cover homeownership costs or emergencies. Whether that is smarter than putting 20% down depends on your payment comfort, debt, savings, and how much value you place on avoiding mortgage insurance.
Mortgage insurance is one of the biggest tradeoffs when putting less than 20% down. It can increase the monthly payment or be paid as a single premium, and the cost varies based on loan-to-value ratio and credit score. That is why it helps to compare the full monthly payment, not just the cash needed at closing.
Mortgage insurance on a conventional loan is not always permanent. Once the loan balance reaches 80% of the home’s value, the homeowner can ask the lender to remove it. Lender procedures vary, and this often requires an appraisal to document market value.
Yes. Because mortgage insurance costs are tied to credit score, even a modest score improvement may reduce the cost. In some cases, paying down a credit card balance before applying can help improve the score enough to make a difference.
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