Thinking about buying a home in Washington with less than 20% down? This guide explains the question many borrowers face: Is a smaller down payment a smart move, or is it better to wait and save more?
The 20% threshold matters because it often affects whether you will need to pay for private mortgage insurance (PMI), how much cash you keep in reserve, and what your monthly housing costs might look like. By the end of this article, you should have a clearer sense of when a small down payment may make sense for your situation in Washington.
Short answer: A small down payment can be a good idea for Washington home buyers when it helps you buy sooner while keeping enough cash available for reserves, closing costs, and other financial needs. But the tradeoff is usually a higher loan balance, a higher monthly payment, and possible PMI if you put down less than 20%.
Big. Small. Medium. These are relative terms that don’t mean much until we plug in actual numbers. So, what constitutes a “small” or low down payment in Washington?
In this context, we are talking about putting down less than 20% of the purchase price. That percentage is significant, because it can determine whether or not a borrower has to pay for private mortgage insurance. These policies protect the lender, but they also allow borrowers to buy a home sooner.
Private mortgage insurance (PMI) is typically required when a home buyer in Washington uses a mortgage loan that accounts for more than 80% of the property value. This is known as the loan-to-value ratio, or LTV. When the LTV rises above 80%, PMI is usually required. This is just a long-time industry standard.
The cost of a PMI policy can vary due to a number of factors. The annual premiums typically range from 0.3% to about 1.5% of the original loan amount. (You can learn more on this subject in our guide to Washington mortgage insurance.)
Making a small down payment can work well for some Washington buyers, but it comes with real tradeoffs. The key is to weigh what you gain upfront against what you may pay over time.
So how low can you go? What’s the lowest possible down payment when buying a home in Washington State? This will depend on the type of loan you are using, among other factors.
A conventional home loan (that’s not insured by the government) might allow you to make a down payment as low as 3% of the purchase price. The Federal Housing Administration (FHA) loan program generally requires a 3.5% investment.
Related: Conventional vs FHA mortgages
The VA home loan program for military folks is a clear winner in this department. It gives eligible borrowers a way to buy a house with no down payment and, in most cases, no mortgage insurance. Of course, not everyone qualifies for this program, which leaves FHA and conventional financing.
A smaller down payment may make sense if buying sooner is important to you, you want to preserve cash reserves, and the resulting monthly payment still fits comfortably within your budget. This approach can also be reasonable when keeping financial flexibility matters more than avoiding PMI.
Waiting and saving more might be the better strategy if your main goal is to avoid PMI, lower your loan balance, reduce your monthly payment, or start with more equity in the home. It can also make sense if making a smaller down payment would leave you with too little cash after closing.
In practical terms, the decision usually comes down to five questions: Can you buy now without stretching your budget? Will you still have enough reserves after closing? Is the monthly payment comfortable with a smaller down payment? Is avoiding PMI a high priority for you? And does your timeline favor moving forward now or waiting to strengthen your finances first?
The bottom line: When it comes to mortgage loans, the best strategy is to choose an option that supports your financial goals and priorities. That might mean making a small down payment and paying for PMI, or saving up for a larger investment to avoid mortgage insurance. This will depend on your savings, your budget, and your priorities.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
No. A 20% down payment is not required to buy a home in Washington. Many borrowers use smaller down payments, but putting down less than 20% usually means a higher loan-to-value ratio and may require private mortgage insurance.
In this context, a small down payment means anything below 20% of the purchase price. That threshold matters because it often determines whether PMI will be required.
PMI is typically required when the mortgage loan exceeds 80% of the property value, which means the borrower puts down less than 20%. This is a common industry standard for conventional financing.
A conventional loan may allow a down payment as low as 3% of the purchase price. FHA loans generally require 3.5%. Eligible VA borrowers may be able to buy with no down payment and, in most cases, no mortgage insurance.
Yes. One of the main advantages of a smaller down payment is that it can help a buyer purchase sooner instead of waiting years to save 20%. For buyers who are otherwise financially ready, that can remove a major barrier to homeownership.
It can be. Putting less down may leave more money available for closing costs, moving expenses, repairs, and emergency savings. This approach can make sense when preserving flexibility is more important than avoiding PMI.
A smaller down payment usually means a larger loan balance, which can increase the monthly mortgage payment. It also means starting with less equity, so building ownership stake may take longer than it would with a larger down payment.
The main drawbacks are possible PMI, a higher loan balance, a higher monthly payment, and slower equity buildup. These tradeoffs can increase borrowing costs over time even if they help a buyer purchase sooner.
Waiting may be the better choice if your main goal is to avoid PMI, lower your loan amount, reduce your monthly payment, or begin with more equity. It can also make sense if a smaller down payment would leave you with too little cash after closing.
The decision usually comes down to whether you can buy now without stretching your budget, whether you will still have enough reserves after closing, whether the monthly payment is comfortable, whether avoiding PMI matters to you, and whether your timeline favors buying now or waiting to strengthen your finances.
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