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Summary: The mortgage that you commit to will have a lasting effect on your finances, as it is a contract that you will be bound to over the term of your mortgage. Considering this, it’s important to do your due diligence to make sure you get the best mortgage deal in WA state, and this article will help you do just that.
Right now is a great time to be in the Washington real estate market in search of a new home. Mortgage interest rates have been on a steady decline for the past year and a half and are not showing any signs of increasing any time soon. In fact, interest rates have recently fallen to their all-time lows in early March 2020. Right now, the mortgage rate for a 30-year fixed-rate mortgage stands in the mid to low 3’s depending assuming good credit on a primary residence.
Despite these low interest rates, it is still prudent to get the best mortgage deal in Washington. Considering all the different lenders out there and all the different mortgage products available, making the right choice is important as differences between one lender vs. another can equal thousands of dollars upfront and tens of thousands over the life of the loan.
There are a some helpful tips that buyers should consider to get the best mortgage deal possible, including the following.
You may want to get pre-approved for a mortgage before you start house hunting. This will help you get a picture of exactly how much you will be able to afford in a home purchase. There’s no use in looking at homes that are way out of your price range. Getting pre-approved will help you determine what price range you should be looking in.
Being pre-approved will also help get the mortgage process moving along faster after you have put in an offer on a home and the seller accepted. It will also help sellers look more favorably on you, since you have already had your financial situation assessed.
If you are looking to refinance getting a full pre-approval is not necessary but a Loan Officer will still review your loan application upfront to make sure you qualify for the loan you are applying for. It is important to provide accurate information on the application so you reduce the chances of issues popping up later in the process. If you are unsure of how to fill out something on the application reach out to a Loan Officer who should be able to assist you and guide you through the app.
Another crucial tip is to get familiar with the different types of mortgages out there. Depending on your situation, you’ll want to pick a mortgage that best suits you and your finances and comfort level. Here are some of the loan options that are available:
Fixed-rate mortgages – These are the more common types of mortgages and involve interest rates that remain fixed throughout the mortgage term, hence their name. You can choose a long- or short-term mortgage, such as a 30-year fixed-rate mortgage or 15-year fixed-rate mortgage. Buyers like these types of home loans because they come with some predictability, as the rate never changes until the mortgage is paid off, renewed, or refinanced.
Adjustable-rate mortgages – Unlike fixed-rate mortgages, adjustable-rate mortgages (ARMs) come with rates that change at various intervals. They start off with a time period whereby the rate is fixed, but the rate then changes at different intervals depending on the structure of the loan. A 5/1 ARM, for instance, means the rate remains the same for 5 years (represented by the first number) but then changes every year (represented by the second number). Adjustable rate mortgages usually have lower interest rates than fixed rate mortgages; however, over the past several years with really low fixed rates don’t be surprised to ARM’s with higher rates than a 30 year fixed.
Conventional mortgages – These mortgages are the most common loan type and are sold to either Fannie Mae or Freddie Mac. Down payments can be made for as little as 3%, as long as your financial health is in check. Down payments can also be 20% or more. If you are able to come up with a 20% down payment on a conventional mortgage, you will not be subject to private mortgage insurance (PMI). But of your down payment is less than 20%, then PMI will apply., This mortgage insurance policy is paid for by borrowers but protects lenders in the event of mortgage default.
FHA loans – Unlike conventional mortgages, FHA loans are backed by the government. They are not actually issued by the FHA, but are rather insured by this entity. Instead, FHA-approved lenders issue FHA loans. These loans are typically easier to secure because their credit criteria is more lax and the down payment amounts are low. Buyers can qualify with credit scores as low as 500. However, in order to secure an FHA loan with the 3.5% minimum down payment, a credit score of at least 580 is needed. (Update – In the immediate aftermath of the Corona Virus minimum credit score requirements have increased to anywhere between 640-680. This is expected to be temporary.)
VA loans – Veterans and members of the military and their families may qualify for a VA loan, which is backed by the US Department of Veterans Affairs. These loans are very attractive to those who qualify because they offer no-money down mortgages, which means 0% down payment is needed (for those who qualify).
There are many loan options to consider, as you can see. Be sure to discuss your options with your mortgage company when applying for a loan.
It’s also important to understand what the local market is doing before you start looking for the best deal on a mortgage in WA.
What is the current temperature of the real estate market in Washington State, and on a city level? For instance, if you’re looking to buy in Seattle, Spokane, Tacoma, or Kirkland, make sure to get a sense of what the specific market is doing. It might be hot, cool, or neutral. There may also be tight inventory or high demand. Knowing the temperature of the local housing market is important before you dive into a real estate transaction.
It is also very important to ensure that your credit score is as high as it can be. Pull your credit report and take a look at your credit score to see if it needs improvement and if there are any errors on the report that may be pulling your score down, and have them investigated and fixed.
Your credit score is crucial because it provides the lender with an idea of what your financial profile is like. A higher credit score is less risky for the lender, which means the lender may be more willing to lower their interest rate, which makes the mortgage more affordable for you.
If your credit score is on the low side, consider taking some time and effort to give it a boost. The best way to do that is to make sure that all your bills are paid on time and in full every billing cycle. You also want to make sure not to spend any more than 30% of your credit limit on your credit card, and make more than your minimum payments when paying your credit card bill every month. Taking these steps can help you bring your credit score up and help you increase your chances of getting approved for a mortgage at a good rate.
If you are considering buying a home in Washington or refinancing your current mortgage, get in touch with your trusted home mortgage professional today.
Whether you’re looking to buy a home in WA or are just looking to have some questions answered about home loans, and Sammamish Mortgage can help. We are a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region that includes Idaho, Colorado, and Oregon. We offer a many different mortgage programs with flexible eligibility criteria. Please contact us to have your mortgage-related questions answered and get the best deal on a WA mortgage!
If you come across some extra money, you may want to consider making a lump sum payment on your mortgage in Washington. Read on to find out more about mortgage recasting.
There are a few key differences between VA, FHA, and USDA loans, in addition to each loan type’s eligibility requirements.