In Washington, 33% of Home Loans Had Down Payments of 3.5% or Less

A down payment is needed to secure a mortgage to purchase a home. But down payment amounts can range a great deal, anywhere from 3% to 20% or more. There are even some zero down payment options available. The question is, how much of a down payment do Washington home buyers put down? This article will answer that question.

About a Third of Buyers Put Down 3.5% or Less

According to recent data, about 33% of home buyers in Washington State make down payments of 3.5% or less. That’s roughly one-third of all purchase loans.

These days, there plenty of options available for borrowers seeking a down payment in the 3% range. That’s good news for buyers who may not be able to come up with a large lump sum of money to secure a mortgage, especially in very expensive real estate markets like Seattle and other centers in King County.

FHA loans used to be one of the only ways to accomplish that goal. Today, however, conventional loan programs offer down payments in that range as well (thanks to policy changes made by Freddie Mac and Fannie Mae).

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Why Some Borrowers Choose to Invest More

While putting down as little as 3.5% is a popular option among buyers in Washington (which makes it easier to get into the housing market with fewer funds available), putting a lot more than that is also common among many buyers.

There are a couple of key reasons why some buyers choose to put a much larger amount of money as a down payment.

Some borrowers choose to make a larger upfront investment, and for a couple of reasons:

1. They do it to reduce the loan amount, thereby reducing the size of their monthly payments.
2. They also do it to avoid paying for mortgage insurance, which is usually required when the loan-to-value ratio rises above 80%.

But many home buyers in Washington can’t afford to put down 20% on a home purchase. Thankfully, there are programs available that require a much smaller investment from the borrower.

Here are three examples of financing options with a lower down payment:

1. Conventional 97% financing: Using a conventional (non-government-backed) mortgage loan, eligible home buyers in Washington State could make a down payment as low as 3% of the home’s value. That’s a higher level of financing than in years past, which is good news for borrowers.
2. FHA 96.5% financing: The Federal Housing Administration (FHA) loan program requires a minimum investment of 3.5%, with a maximum loan-to-value ratio of 96.5%. Borrowers who want to use that option must have a credit score of 580 or higher, as per HUD guidelines.
3. VA 100% financing: If you happen to be a military member of veteran, there’s a good chance you could qualify for a VA-guaranteed home loan. This program offers financing of up to 100%, which eliminates the need for a down payment altogether.

Related: PMI helps thousands of borrowers

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Have Questions About Mortgages in Washington?

Do you have questions about down payment options and mortgages in Washington? If so, we’d love to help. Sammamish Mortgage has been helping home buyers and homeowners since 1992. We offer many mortgage programs to borrowers all across Washington, Oregon, Idaho, California, and Colorado. Visit our website to get an instant rate quote or to use our online mortgage calculator. Please contact us if you have financing questions, or if you’d like to get pre-approved for a mortgage.