“How much do I have to put down when buying a home?”
This is one of the most common questions among home buyers, especially in relatively high-priced housing markets like Seattle. Today, we’ll run some numbers to figure out what the typical down payment would be in Seattle, Washington for different loan types.
A Typical Down Payment in Seattle: Summer 2018
According to a recent analysis by ATTOM Data Solutions, the median down payment among home buyers in the U.S. is somewhere around 7% of the purchase price.
It’s possible to put down less than that. Some mortgage programs allow for down payments in the 3% range (or 0% for military folks). But we’re trying to determine the typical or average down payment in Seattle, so the 7% median figure is a good place to start.
Down payment percentages are based on the home price. So a more expensive property will result in a larger upfront investment, with all other things being equal. But for the sake of this analysis, let’s stick with the “median” theme for house values.
According to Zillow, the median home value in Seattle was around $764,000 as of July 2018. The regional Multiple Listing Service estimated the median price at $812,500 during the same month. (Different data, different output.) Averaging those two figures gives us $788,250. That’s the number we’ll use for calculating the average or “typical” down payment among Seattle home buyers.
- So we have a median upfront investment of 7%, and an average home price of $788,250.
- Given those numbers, the typical down payment for Seattle home buyers in the current market would come to around $55,177.
- The minimum investment for a conventional loan (3%) on an average-priced home would come to around $23,647.
- Borrowers using an FHA loan with a minimum down payment of 3.5% would need to come up with $27,588 to purchase a median-priced home.
Clearly there are a lot of variables that go into the mix. So the closest we can come to an average down payment for a typical home purchase in Seattle is somewhere around $55,000, as of summer 2018. But some borrowers put down much less than that, by using a mortgage program with a lower investment requirement.
Gift Money: The ‘Friends and Family’ Plan
Did you know it’s possible to use gift money from a family member or close friend to help cover your down payment expense? It’s true. Most of the major mortgage loan products available today allow borrowers to use funds gifted from an approved third party.
This kind of strategy is especially helpful in higher-priced real estate markets like Seattle, where a lot of buyers need down payment help to make a purchase.
Meanwhile, Home Prices Continue to Rise
Another common question among Seattle home buyers is: Should I buy now or wait a while? What’s the best time to make a purchase?
As we’ve reported in the past, the latest forecasts for the Seattle-area real estate market predict that home prices will continue to rise over the coming months. And mortgage rates could inch upward as well, due to economic growth and policy adjustments made by the Federal Reserve (among other factors).
So those home buyers who postpone their purchases might end up encountering higher housing costs.