The down payment is a big part of the mortgage and home-buying process for Washington home buyers. But just how much of a down payment do you actually need?
In July 2017, we we looked at the median home values for Seattle, Spokane, Tacoma and Vancouver — Washington’s four most populous cities — to determine what the average down payment would be at different levels and for different mortgage programs.
For each city, we used the following down payment levels:
- Conventional 3% — This is the minimum down payment for a conventional (not government insured) mortgage loan in Washington State. Conventional mortgage financing is the most popular option among home buyers today, with FHA and VA rounding out the top three.
- FHA 3.5% — The Federal Housing Administration (FHA) loan program is also popular among home buyers in Washington, particularly first-time buyers with limited funds saved up. The minimum down payment for this program is 3.5% of the purchase price.
- Conventional 10% — This is close to the average-sized down payment for a mortgage loan in Washington, so we included this tier as well.
- Conventional 20% — Some home buyers choose to make a down payment of 20% or more because it eliminates the need for mortgage insurance, and thus reduces the overall borrowing costs.
Average Down Payments: Seattle, Spokane, Tacoma and Vancouver
Here’s a look at the average down payments for a mortgage loan in Seattle, Spokane, Tacoma, and Vancouver, based on median home values during the summer of 2017.
Seattle is by far the most expensive real estate market on this list. Home prices in the city have risen steadily over the last few years. According to Zillow, the median home value for Seattle was $682,300 as of July 2017. Using that price as a starting point, we get the following down payment amounts for various mortgage options.
- 3% of median home price = $20,469
- 3.5% (FHA) = $23,880
- 10% = $68,230
- 20% = $136,460
Home prices in Spokane have also risen steadily over the last couple of years, but they are much lower than the median price point for Seattle. In July, Zillow reported that the median home value for the city of Spokane, Washington was $175,100. Here’s how that would play out with the down payment levels listed above.
- 3% of median home price = $5,253
- 3.5% (FHA) = $6,128
- 10% = $17,510
- 20% = $35,020
Tacoma is one of the more affordable housing markets within the Seattle metro area. In July 2017, the median home value for the city was around $254,800. Plugging that into our four investment levels gives us the following down payment amounts:
3% of median home price = $7,644
3.5% (FHA) = $8,918
10% = $25,480
20% = $50,960
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 = $8,484
- 3.5% (FHA) = $9,890
- 10% = $28,280
- 20% = $56,560
Some Good News for Home Buyers
It is a common misconception that borrowers need 20% down to buy a house with a mortgage loan. As you can see from the above analysis, that’s just not the case. Well-qualified borrowers can often get a down payment as low as 3% for a conventional loan, or 3.5% for an FHA-insured mortgage loan. Military members and veterans might be eligible for a VA home loan, which offers 100% financing.
Additionally, a lot of mortgage programs these days allow for down payment gifts from third parties. This means a family member, close friend, or even an employer could donate funds to help you cover your down-payment expense.
The bottom line is that 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 mortgage professional about your financing options.