How Much Do First-Time Buyers in Washington Have to Put Down?

July 28, 2023
Last updated:
January 23, 2024
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First-time buyers in Washington tend to have a lot of questions when it comes to the minimum down payment requirements for loans. They often wonder how much money they have to save up for a purchase, and what the average down payment is among first-time home buyers.

Today, we will address both of these questions.

Let’s start with the short version. The average down payment among first-time buyers in Washington is around 6% to 7% of the purchase price. FHA loans allow for a down payment as low as 3.5%, while conventional mortgages go as low as 3% if the borrower has mortgage insurance.

And don’t worry if some of these terms are unfamiliar to you. By the time you finish this article, you’ll understand what they mean and how they relate to you as a first-time home buyer.

How Much Do First-Time Buyers Need to Put down?

When buying your first home in Washington, the minimum down payment amount will depend on the type of loan you use and other factors.

For instance, a person who needs to borrow a lot of money for a luxury home purchase might have to put more money down, compared to someone buying a more affordable home. That’s just one of several variables that can determine the minimum investment required.

Previous surveys have found that the average down payment among first-time home buyers in Washington and nationwide is around 6%. But there’s also a widespread misconception that buyers need to invest a lot more than that amount.

According to a recent report from the National Association of REALTORS:

“When surveyed, 35% of consumers think they need 16% to 20% for a down payment … However, in actuality the typical down payment for first-time buyers has ranged between six to seven percent since 2018.”

Unfortunately, the myth that first-time buyers need to invest 20% on a home purchase has persisted for a long time. But as you can see from the above quote, you don’t necessarily need to make a down payment of that size. You might even be able to put down less than the 6% to 7% average mentioned above, if choose the right mortgage option.

So let’s explore some of those options.

The FHA Loan Program Allows 3.5% Down

The Federal Housing Administration (FHA) home loan program is a popular option among first-time buyers in the state of Washington. There are two main reasons for its popularity:

  • For one thing, this program allows home buyers to make a down payment as low as 3.5%, as long as they have a credit score of 580 or higher.
  • FHA loans also tend to have more lenient qualification requirements for borrowers, since they are partially insured by the federal government.

A first-time home buyer in Washington who uses an FHA loan could put down as little as 3.5% of the purchase price or appraised value. So that’s one way to minimize the upfront expense associated with a home purchase. But it’s not the only way.

Going Even Lower With Private Mortgage Insurance

First-time buyers could make an even smaller down payment by using a conventional loan with private mortgage insurance attached.

A conventional loan is basically a “regular” mortgage loan that does not receive any kind of government backing. This distinguishes it from the FHA loan program mentioned above, as well as the VA mortgage program for military members and veterans.

Eligible borrowers can often qualify for a conventional loan with a down payment as low as 3%. The caveat is that private mortgage insurance (PMI) is typically required with such a low down payment. This insurance is typically required when a loan accounts for more than 80% of the appraised home value.

But for a lot of first-time home buyers in the state of Washington, the benefits of making such a low down payment far outweigh the cost of private mortgage insurance. As we explained in a previous article, PMI allows first-time buyers to purchase a house sooner rather than later, since they don’t have to invest as much.

Gift Money Acceptable in Most Cases

Here’s something else that might come as a pleasant surprise. Many home buyers in Washington are able to use gift money from a third party to help cover their down payment and closing costs.

A lot of different mortgage programs allow for down payment gifts, and that includes both conventional and government-backed home loans. But a lot of borrowers don’t even realize it’s an option, which is why we mention it so often in our blog posts.

By combining this strategy with a low down payment mortgage option, first-time buyers in Washington can greatly reduce their out-of-pocket expense.

In closing, here are the most important points to take away from this article:

  • Many first-time home buyers believe that they have to invest at least 20% when purchasing a home.
  • But the 20% requirement usually only applies to “jumbo” loans used for expensive properties.
  • The average down payment among first-time buyers in Washington is around 6% to 7% of the purchase price.
  • FHA loans allow for a down payment as low as 3.5%, while conventional mortgages go as low as 3% if the borrower has private mortgage insurance (PMI).
  • The VA loan program for military members allows for 100% financing.
  • Borrowers can often use gift money from a third party to help cover the down payment.

Have questions? You have a lot of options when it comes to using a mortgage loan. And we can help you explore those options to choose the best one for your particular situation. Please contact our staff with any financing-related questions you have or to apply for a loan.

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