It can be challenging to save enough money for a down payment, especially in the Seattle area where home prices running higher than the national average. But with proper planning and good old-fashioned financial discipline, home buyers can overcome many of these challenges and achieve their dream of homeownership.
This article explores three of the most common down payment challenges Seattle-area home buyers encounter, along with some strategies for overcoming them.
Challenge: High Home Prices
According to a recent report from Realtor.com, the median listing price within the Seattle-Tacoma metro area is now well over $800,000. This presents a challenge for some home buyers in the area, especially when it comes to down payments. Here are some ways to overcome this challenge.
The more money you can save, the easier it will be to qualify for a mortgage and afford a down payment. Consider setting up a separate savings account just for your down payment. Set up automatic monthly transfers from checking to savings, to make it even easier.
Look into down payment assistance programs.
There are a number of government and private programs that offer down payment assistance to eligible home buyers in Seattle, and across the state of Washington. Some offer lump sums, while others provide deferred payments or interest-free loans.
Consider a less expensive home.
If you’re struggling to save for a down payment in Seattle, you might need to consider buying a less expensive home. This might mean downsizing to a smaller home, or shopping for a more affordable property type like a condominium or townhouse.
Consider alternative loan options.
Explore different loan programs that can accommodate high home prices. For example, some lenders offer jumbo loans that are designed for expensive properties. While these loans often require a larger down payment and have stricter requirements, they can provide financing options for purchasing a high-priced home.
Explore different neighborhoods.
If the prices in your desired neighborhood are beyond your budget, consider exploring nearby neighborhoods and communities. The median price point can vary quite a bit across the Seattle metro area. You can increase your chance of finding an affordable home by expanding your search area.
Challenge: Carrying Other Debts
Additional debts, like credit cards and student loans, can make it harder to save up for a down payment on a Seattle home purchase. These and other debts can chip away at your monthly income, leaving you with less money for your down payment fund. Here are some things Seattle home buyers can do to overcome this down payment obstacle.
Create a budget and track expenses.
Start by analyzing your income, expenses and debts. Develop a comprehensive budget that includes all your financial obligations, such as credit card payments, student loan installments, and other debts. Tracking your expenses will help you identify areas where you can cut back and redirect funds towards your down payment savings.
Prioritize debt repayment.
While saving for a down payment, you might want to reduce your high-interest debts, such as credit card debt. Consider using repayment strategies like the “snowball” method (paying off the smallest debts first) or the “avalanche” method (tackling debts with the highest interest rates first). These and other strategies can help you free up additional funds to put toward your down payment.
Cut unnecessary expenses.
Review your monthly expenses and identify areas where you can make cuts. Focus on non-essential spending, such as eating out, entertainment expenses, or subscription services. Look for ways to save on utilities, insurance, and other recurring bills. Adopting a more frugal lifestyle can accelerate your down payment savings (among other benefits).
Challenge: Insufficient Income
Aspiring home buyers in the Seattle area often discover they don’t earn enough money to save for a down payment, while managing other monthly expenses. This can be exacerbated by the two obstacles mentioned previously: high home prices and other debts.
We don’t always have direct control over our income situation — at least not in the short term. But there are some long-term proactive steps Seattle home buyers can take to increase their income and save for a down payment.
Increase income through career growth.
Explore opportunities for career advancement or professional development that can lead to higher-paying positions. This might involve upgrading skills, pursuing further education, or seeking promotions within your current company. Increasing your earning potential could provide a significant boost to your income and help you save for a down payment.
Take on a side job or freelance work.
Consider taking on a part-time job or freelance work to supplement your income. This might involve freelance writing, landscaping, tutoring, or other services that align with your unique skillset. The additional income can be directly allocated towards your down payment savings.
Explore the gig economy.
The gig economy offers many flexible and on-demand work opportunities that can generate extra income. Platforms like Uber, Lyft, TaskRabbit and Fiverr allow individuals to provide services or complete tasks on a freelance basis. These gigs can be done during evenings or weekends and provide additional income you can put toward your down payment.
Consider using a down payment gift.
If you earn enough money to cover the monthly payments associated with a home purchase, but need help with the down payment, you might consider using gift money from a third party. Many of the mortgage programs available today allow family members to contribute money to a home buyer’s down payments and closing costs.
Delay home buying (for now) and focus on increasing income.
If your current income is well below the level needed to buy a home in the Seattle area, you might want to consider postponing your purchase for a while. This will allow you to focus on increasing your income. Use this time to pursue career advancement opportunities, acquire new skills, or build a side business.