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Getting Down Payment Help from Family for a Seattle Home Purchase

There are different kinds of down payment help available for home buyers in Seattle, Washington. And with house values rising rapidly across the metro area (more than 10% in the last year alone), a little assistance can go a long way.

Today, we will focus on a little-known but very useful form of down payment help for Seattle home buyers: gift money from family members.

Getting Down Payment Help from Family to Buy a Home in Seattle

Most home buyers in Seattle use mortgage loans to finance their purchases. If you fall into this category, you will likely encounter some kind of down payment requirement. You’ll have to put a certain amount of money down in order to secure your loan.

For some borrowers, this upfront investment represents the biggest obstacle to homeownership. But there are ways to get down payment help to overcome this hurdle, allowing you to buy house in Seattle.

One way to accomplish this is to obtain money from a third party, such as a parent, a family member, or some other approved “donor.” In mortgage lingo, this is referred to as a down payment gift. Essentially, someone else is giving you money to cover some or all of your required upfront investment.

But a lot of home buyers in Seattle don’t even realize this is an option. That’s why we’re blogging about it today. In fact, a survey conducted by Realtor.com last year found that 35% of respondents thought they had to make a down payment of 15% to 20% when buying a house. That’s just one of the many misconceptions on this topic.

The truth is, it’s possible to make a lower investment while still qualifying for a mortgage loan. On top of that, most mortgage programs today allow for down payment help to be provided from family members and other approved sources.

Read: Seattle ranked #1 for bidding wars

A Fairly Straightforward Process

Here’s how one would go about getting down payment help from a third party to buy a home in Seattle:

  • Speak to a mortgage company (like us) to determine if this option is permitted under your loan program. You’ll also want to find out who is allowed to donate money. The donor might include parents, some other relative, or even a close friend.
  • Next, the person donating the money would deliver the funds, usually in the form of a check that is deposited into the home buyer’s bank account.
  • The donor must also provide a letter that clearly states the money being provided is truly a gift. In other words, they must clarify that they do not expect any kind of repayment from the person buying the house.
  • The mortgage underwriter will review all documents to ensure that they meet guidelines, and then the loan will move forward as normal.

As you can see, there is nothing overly complicated about getting down payment help from family to buy a house in Seattle. And with home prices expected to continue rising steadily from 2018, this kind of assistance is more useful than ever.

Mortgage Programs That Require A Relatively Low Investment

Seattle home buyers with limited funds saved up for a down payment can combine the gift strategy above with a mortgage loan that requires less money down. This would further reduce the financial burden of making an upfront investment.

These days, borrowers can make a down payment in the 3% range and still qualify for loan. For example, the FHA loan program requires a minimum investment equaling 3.5% of the purchase price or the appraised value. Conventional loans (which are not insured or guaranteed by the government) allow for down payments as low as 3% in some cases.

The bottom line is that there is a lot of flexibility regarding the upfront investment on a home loan in Seattle. By using a mortgage loan with a relatively low investment requirement, combined with down payment assistance from a family member, home buyers in Seattle could minimize their out-of-pocket expense.

Send us your questions. Sammamish Mortgage has been meeting the mortgage financing needs of Washington home buyers for more than 20 years. We offer a variety of loan products, some of which have flexible qualification criteria. Please contact us if you have down payment or other mortgage-related questions.

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