Is an FHA Loan in WA State Enough to Buy a House?

Published:
May 2, 2024
Last updated:
May 2, 2024
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The FHA loan program is the second most popular type of mortgage loan in the state of Washington, following the standard conventional loan. First-time buyers, in particular, often choose the FHA loan program because it offers a low down payment of 3.5%.

One common question about this program has to do with the borrowing limits and purchasing power. A lot of buyers want to know if an FHA loan provides enough funding to cover the typical home price here in the state of Washington.

In many cities across the state, the current FHA loan limit is more than enough to purchase a median-priced home. But in more expensive real estate markets like the Seattle metro area, an FHA loan in WA State might not get you where you need to be in terms of financing range. That’s because Seattle home prices, for instance, might require a much bigger loan, which could exceed FHA loan limits.

If you’re thinking of buying a home in WA State with an FHA loan, read on to find out if this loan type will be enough to finance your purchase.

FHA Loans and Home Prices in Washington

FHA loans have certain limits associated with them. These limits are established by the Department of Housing and Urban Development (HUD) and represent the most you can borrow when using an FHA loan to buy a house.

In Washington, the current FHA loan limits in 2024 range from $498,257 to $977,500, depending on the county. They can vary from one county to the next because they are based on home prices.

In many cities across the state, the current FHA loan limit is set above the average home price. So in those areas, home buyers should be able to find (and finance) a suitable property with greater ease.

But in other, more expensive housing markets such as Bellevue, Washington, the typical home price can be well above the maximum FHA loan amount. And this might make it harder to finance a home purchase in those areas.

Bottom line: The FHA loan in WA State is a good product with several important benefits. But it’s generally not intended for high-end home purchases. These loans are more commonly used in lower-priced housing markets, and they’re less common in pricier markets.

Example: Spokane vs. Sammamish Housing Costs

As a home buyer, you want to explore all of your mortgage options in order to find the best fit for your situation. Local home prices are a good place to begin this research.

For example, let’s look at two Washington cities that exist on opposite ends of the pricing spectrum: Sammamish and Spokane.

Spokane (Lower Prices)

The Spokane real estate market offers more affordability than nearby cities like Seattle. Right now, the median home value in Spokane, Washington is currently around $386,000. The maximum FHA loan size for Spokane County is currently set at $498,257. A home buyer in this market should have no problem using an FHA to buy a house, in terms of pricing.

Sammamish (Higher Prices)

The median home value for Sammamish, Washington is currently more than $1.5 million. The maximum FHA loan amount for King County, Washington is $977,500. A home buyer using an FHA loan in the Sammamish-area real estate market will likely have fewer properties to choose from, due to the high-cost nature of this particular market.

If you want to buy a home that exceeds the maximum FHA loan amount for your area, you might have to explore other mortgage options or come up with a larger down payment to cover the difference.

This is why it’s so important to work with a knowledgeable mortgage professional. Our team can help you choose the best loan option from a wide range of products, based on your specific financing needs and housing goals.

Going ‘Jumbo’ When You Need to Borrow More

In Washington’s more expensive real estate markets, home buyers often need to borrow more than the maximum FHA loan amount for their county. Many of them turned to conventional home loans for this purpose, and the jumbo mortgage product in particular.

To clarify, a “conventional” mortgage loan is one that does not receive any kind of insurance backing from the federal government. The conventional label distinguishes these loans from government-backed mortgage programs like FHA and VA.

Home buyers who wish to purchase a property that exceeds the government-imposed loan limits for their county could use what’s known as a jumbo mortgage loan.

Jumbo financing is common in pricier real estate markets like Bellevue, Redmond, Sammamish, and other cities where the typical home price exceeds $1 million. In expensive centers like these, you might need to look at jumbo mortgage options when taking out a home loan.

3 More Things to Know About FHA Loans

In addition to the maximum financing range, FHA loans have other specific features and requirements as well. Here are three more things you should know, if you’re thinking about using an FHA loan to buy a home in Washington.

  1. Down payment of 3.5%. The Federal Housing Administration requires borrowers to put down at least 3.5% of the purchase price of the appraised value when using an FHA loan. This translates into a maximum loan-to-value (LTV) ratio of 96.5%, for a home purchase.
  2. Credit score of 580. Most home buyers in Washington who use the FHA loan program do so because it allows for a relatively low down payment, as mentioned above. But you’ll need a credit score of at least 580 to qualify for the 3.5% down payment option.
  3. Mortgage insurance. Home buyers who use FHA loans typically have to pay an upfront insurance premium that equals 1.75% of the loan amount. There’s also an annual premium that can vary depending on the loan-to-value ratio and term length. For most borrowers who use this program, the annual premium comes to 0.55% and stays with you for as long as you keep the loan.

Need Financing?

Whether you’re looking to take out an FHA loan in WA State or other type of mortgage to finance a home purchase, we can help. Sammamish Mortgage has been helping borrowers in the Pacific Northwest for three decades. If you’re ready to make a move, get a current rate quote in Washington and get pre-approved for a mortgage today to get the ball rolling!

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