One of the first things on a homebuyer’s mind when considering a home purchase is the down payment. That’s because the down payment is an integral part of the mortgage and home-buying process for Washington State home buyers. But just how much of a down payment do you need when considering a purchase in the major metro areas of Washington State?
In order to illustrate, we looked at median home values for Seattle, Spokane, Tacoma and Vancouver — Washington’s four most populous cities — and determined what the average down payment would look like for some of the more common mortgage programs.
For each city, we used the following down payment levels:
- Conventional 3% — The minimum down payment for a conventional (not insured by the federal government) mortgage loan in Washington State is 3% of the sales price. Currently, conventional mortgage financing is the most popular option among home buyers, with FHA and VA rounding out the top three.
- FHA 3.5% — The Federal Housing Administration (FHA) loan program is very popular in Washington state, particularly among first-time home-buyers with limited cash on hand. The minimum down payment for an FHA loan is 3.5% of the purchase price.
- Conventional 10% — The average down payment in Washington state is very close to 10%, so we’ve included this metric for a peak at a broader statewide value.
- Conventional 20% — most financial planners recommend a minimum down payment of 20% or more because it eliminates the need for private mortgage insurance, thus reducing the overall borrowing costs and monthly payments.
Average Down Payments: Seattle, Spokane, Tacoma, and Vancouver
Now that we have defined some of the most popular mortgages, let’s look at the average down payments for Seattle, Spokane, Tacoma, and Vancouver, based on median home values in the summer of 2019.
The hip Seattle scene is home to some of the most expensive real estate on the market. Home values have seen a steady rise over the last few years. According to Zillow, the median home value for Seattle was $682,300 in May of 2019. Currently the average home price in Seattle stands at 723,000. Using the current value as a guide, we get the following down payment amounts for various mortgage options.
- 3% of median home price = $21,690
- 3.5% (FHA) = $25,305
- 10% = 72,300
- 20% = 144,600
Home prices in Spokane have also risen steadily over the last few years, and are expected to continue in one of Washington’s hottest markets. Still, Spokane represents a much more affordable side of the market than its sister, Seattle. In May, Zillow reported that the median home value for the city of Spokane, Washington was $212,000. Here’s how that would play out with the down payment levels listed above.
- 3% of median home price = $6,360
- 3.5% (FHA) = $7,420
- 10% = $21,200
- 20% = $42,400
While the average home price for Tacoma is 100k more than Spokane, it is still one of the more affordable housing markets within the Seattle metro area. In May 2019, the median home value for the city was around $312,000 (representing a 10% rise over last year). Plugging that number into our four investment levels gives us the following down payment values:
- 3% of median home price = $9,360
- 3.5% (FHA) = $10,920
- 10% = 31,200
- 20% = $62,400
House prices in Vancouver rose by nearly 10% over the last year alone (when measured from July ’16 – July ’17). As a result, home buyers in the city are facing higher housing costs and larger down payments. The median home value for Vancouver reached $282,800 in July of this year. Here’s what the down payments might look like for that price point.
- 3% of median home price = $9,630
- 3.5% (FHA) = $11,235
- 10% = $32,100
- 20% = $64,200
Some Good News for Home Buyers
It is a common misconception that borrowers will need 20% down to secure a mortgage and purchase a home. As you can see, well-qualified borrowers can secure a mortgage with a down payment as low as 3% with a conventional loan, or 3.5% for an FHA-insured mortgage loan. Military members and veterans may also be eligible for a VA home loan, which offers 100% financing (no money down).
These days, it is also important to consider the fact that many mortgage programs allow for down payment gifting from third parties. This means a family member, close friend, or even an employer can gift or donate funds to help offset down-payment expenses
The bottom line? There is a lot more flexibility built into mortgage down payments than the average borrower realizes. That’s why it’s important to speak to a qualified mortgage professional about your financing options.