There are several things you can do to figure out how much mortgage you can afford, including calculating a realistic budget before purchasing a home.
Summary: Seattle rents are some of the highest in Washington State and the country as a whole. Considering this, it might make more sense to buy a home and pay a mortgage instead, especially with interest rates as low as they have been over the recent past. This article will discuss Seattle rents and the argument for buying a home instead.
With Seattle rents rising steadily in 2020, a lot of renters in the area are now eyeing homeownership as a possible alternative.
And here’s an important point to consider. Home buyers who use fixed-rate mortgage loans to buy a house can enjoy a monthly payment that never goes up. The same cannot be said for renting a house or apartment.
Would you be better off buying a home in Seattle with a fixed-rate loan, or continuing to rent? Here’s some information to help you decide.
Seattle Rents Still Among the Highest in the Nation
Seattle-area rents are still very high compared to other markets in the state of Washington and the nation as a while. As of August 2020. The median rent price in Seattle is $2,600. The truth is, rents, have been fluctuating over the past couple of years, with the peak of $2,770 in August 2017. But the point is, they still remain high.
And it’s not just in Seattle proper. High Rising rents are a common trend across the entire metro area. In the Seattle-Tacoma-Bellevue Metro Area, rents are currently at $2,295. For comparison purposes, the median rent in Tacoma alone is $1,795 and in the entire US, it’s $1,650, according to real estate research firm Zillow, as of August 2020. That means rent prices are nearly $1,000 higher per month in Seattle compared to the national average and about $800 more than in nearby Tacoma.
New construction should bring additional rental units onto the market over the coming months. But probably not enough to reverse the trend of rising rents in the Seattle area. It’s a market reality: rental prices will likely continue rising, on a year-over-basis, for the foreseeable future.
Rising rents have prompted many Seattle-area renters to explore the possibility of homeownership. There are a lot of variables to look at when considering whether you should rent or buy a home. Monthly costs are one of the most obvious factors.
But here’s something a lot of renters don’t consider. When you buy a home using a mortgage loan, you have the ability to “fix” your monthly housing payments so that they stay the same. This can be done by using a fixed-rate mortgage loan.
Fixed-Rate Loans Allow You to ‘Lock’ Your Monthly Payments
A fixed-rate mortgage loan is exactly what it sounds like. It is a home loan with an interest rate that remains fixed — or unchanging — for as long as you keep it.
For example, the 30-year fixed mortgage carries the same interest rate for the full 30-year repayment and amortization period. Unless, of course, the homeowner sells or refinances the home before then, in which case the original loan is replaced with a new one.
Consider the difference:
- Seattle rents have been rising steadily, and they could continue along an upward trajectory for the foreseeable future. We don’t really know what they’ll do in the coming months, so there’s a lot of uncertainty.
- A person who buys a home in Seattle using a fixed-rate mortgage loan will have the same monthly payments for as long as he or she keeps the loan. There are no surprises down the road. In terms of cost, it’s a more stable and predictable housing situation.
A distinction should be made here. Some home loans have an interest rate that can change over time, usually once per year. These are known as adjustable-rate mortgages or ARMs. But a fixed mortgage lives up to its name, keeping the same interest rate for the full repayment term.
Of course, there are pros and cons to all types of home loans. But if you’d like to combine the joys of homeownership with a monthly housing payment that stays the same, consider using a long-term fixed-rate mortgage.
Interest Rates Near Historical Lows
According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage is 29.3% as of September 3, 2020. That’s one of the lowest rates we’ve seen over the past 12 months. At the same time last year, rates were at 3.49% over the same week. And even though that is still relatively low compared to rates from years past, today’s rates are comparatively lower.
This makes homebuying much more affordable for buyers, even with home prices being as high as they are in Seattle. As of August 2020, the median home price for a home in Seattle is $767,900. And while that’s high compared to most other centers across the state of Washington, it’s actually quite a bit lower than the price peak in May 2018 of $786,000.
In fact, prices have dipped in Seattle over the past few months. But they’re expected to increase over the foreseeable future. So, lower prices, low interest rates, and the potential for prices to rise makes now a good time to buy a home in Seattle.
Have Questions About Home Loans in Seattle?
Sammamish Mortgage is a family-owned and operated Mortgage Company who has been proudly serving the Pacific Northwest since 1992. We currently lend in all of Washington, Oregon, Idaho, and Colorado. With their wide offerings in mortgage programs and flexible qualification criteria. Get in touch with Sammamish Mortgage today!