Low Down Payment Mortgage Options for Seattle Home Buyers

February 17, 2017
Last updated:
December 6, 2021
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Summary: We are continuing a blog series to address some of the frequently asked questions among Seattle-area home buyers. Today’s entry answers the question: How can I buy a house with a low down payment in Seattle, Washington? Which mortgage options are best for someone seeking a low down payment? This article will answer these questions.

When you buy a home in Seattle, you will need a mortgage if you are not paying in cash. And when you secure a mortgage, you will need a down payment, unless you qualify for a zero-down payment VA loan. But how can you secure a home loan without a massive down payment?

Buying a Home in Seattle With a Low Down Payment

There are several ways to buy a home with a low down payment in Seattle. But what does “low” mean, exactly? In this context, we’re talking about mortgage loans that offer a down payment of 5% or less. There are several ways to accomplish such a goal.

Related: The Seattle home buyer’s guide to down payments

Here are three low-down-payment mortgage options for Seattle home buyers with limited funds saved up:

1. Conventional Loan with 3% Down Payment

Definition: A conventional mortgage loan is one that is not insured or guaranteed by the government. This sets it apart from the FHA and VA loan options described below.

It’s a common misconception that conventional home loans require a down payment of 20%. The truth is that many lenders today are offering conventional mortgages with down payments as low as 3%. So this is one way to buy a home in Seattle with less money down.

Fannie Mae, for instance, offers a 97% loan-to-value (LTV) financing option that allows eligible borrowers to put just 3% down when buying a home. Please contact us if you’re interested in this program, or any of the other options explained on this page.

Of course, if you use a conventional loan and put less than 20% down, there’s a chance you’ll end up paying private mortgage insurance, or PMI. This is a common trade-off, and we’ve discussed it in detail below.

Today’s Seattle Mortgage Rates

2. FHA Loan with 3.5% Down Payment

Through the FHA loan program, you could buy a home in Seattle with a down payment as low as 3.5%. This is a popular mortgage financing option for home buyers who don’t have a lot of money saved up for a down payment.

Learn more about the FHA program

Another potential benefit is that FHA loan are generally easier to obtain, when compared to the conventional mortgage loans mentioned above. That’s because lenders receive insurance protection from the Federal Housing Administration, in the case of borrower default. So there’s an added layer of protection involved with this particular program.

If you want to buy a home in Seattle with a low down payment, give the FHA mortgage program a look. And be sure to contact us with any questions you have!

3. VA Loan with No Down Payment

If you’re a member of the military, it’s hard to beat the VA loan program. That’s because it allows you to buy a home in Seattle with no down payment whatsoever.

The Department of Veterans Affairs (VA) loan program rewards our brave men and women in uniform. It offers 100% financing to eligible borrowers, which eliminates the need for a down payment altogether. You can put money down if you choose to, in order to reduce the size of your monthly payments. You just don’t have to.

View VA eligibility requirements

Unlike most low-down-payment mortgage options in Seattle, VA-eligible borrowers can also avoid paying mortgage insurance (in most cases). As you can see, it’s one of the best options available for military members.

Low Down Payments Usually Require Mortgage Insurance

If you buy a home in Seattle with a low down payment, you might be required to pay mortgage insurance on the loan. This would increase the size of your monthly payments.

When the loan-to-value ratio rises above 80%, mortgage insurance is usually required. This is true for both conventional and FHA loans. This insurance reduces the amount of risk for the lender, which in turn can help you qualify for a loan you might not otherwise be able to get. But it does increase the overall cost. So it’s one more thing to consider.

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Need a Home Loan?

Will you need mortgage financing to buy a home in Seattle? We can help. Sammamish Mortgage has been serving buyers across the Pacific Northwest since 1992. We offer a wide variety of mortgage programs with flexible qualification criteria to borrowers in WA, OR, ID, and CO. Please contact us today with any financing-related questions you have.

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