How to Buy a House in Washington: A Homebuyer’s Guide

A real estate agent can be incredibly helpful as you navigate the process of buying a home in Washington. They provide plentiful information about the property without requiring you to put in the extra legwork. They can also show you houses that fit your taste based on their assessment. The traits to look for in a real estate agent are:

• Honesty: An honest real estate agent discloses even the downsides of a house.
• Reliability: Your agent should know how to manage their time, meet their obligations and stay true to their word.
• Knowledge of the area: You want to choose an agent that knows the fine details of real estate values and transactions in Washington.

Your cost of living depends on your location. Here are a few regular expenses that could affect your budget:

• Groceries
• Rent or mortgage
• Education
• Transportation
• Utilities (electricity, water, internet)
• Income and property taxes
• Car and health insurance

Keep in mind that these costs, as well as the cost of homes, can vary considerably between locations in the same state. MoneyGeek’s cost of living calculator provides you with your potential budget in your chosen city in Washington.

Real estate properties are significantly more expensive than the national average in Washington. If it’s a bit out of your budget, you can look for more affordable areas within this state. Suburbs and rural areas tend to have cheaper homes and a lower overall cost of living.

Your money goes farther when you’re living in cheaper neighborhoods. On the downside, important establishments, like hospitals and schools, may be far from your house. Make sure the trade-off of reduced access to amenities is worth it for you.

Every loan has unique rates that are largely based on the borrower's profile. If you satisfactorily meet the lender’s requirements, you’re more likely to receive favorable rates. For instance, an individual with a good credit score may be qualified for lower rates and larger loan amounts than one with a poor credit score.

Currently, the average mortgage interest rates for each type of common mortgage loan are:

• Conventional home loans: 6.3%
• VA loans: 6.4%
• USDA loans: 3.3%
• FHA loans: 7.0%

Some of these loans are only accessible to those who meet the lender’s specific eligibility requirements. VA loans, for example, are only for veterans and active military personnel.

By calculating mortgage rates, you can plan your expenses better while you’re paying off your mortgage loan. It also gives you an idea of what your finances will be like in the next few years. This will help give you a holistic view of your financial situation and determine if you can afford the loan.

You can check your potential monthly payments using MoneyGeek’s mortgage calculator. If you’re choosing between an FHA loan or a conventional loan, you can take a look at your possible expenses using MoneyGeek’s FHA vs. conventional loan calculator.

A borrower’s profile is a significant factor that influences loan rates, terms, amounts and other pertinent details. Because of this, every person’s mortgage loan may have different rates and terms. Lenders consider these factors when approving loan applications:

• Credit score: Your credit score, which is based on variables such as your payment history, regularity and amount of outstanding debt, reflects your level of financial responsibility.
• Debt-to-income (DTI) ratio: It measures how much of your gross monthly income goes toward paying down your debts each month. A low DTI ratio suggests that you have the financial means to pay off your debt.
• Down payment: A higher down payment results in a cheaper interest rate, reducing the cost of your loan.
• Income: The higher your income, the more likely you are to repay the loan successfully.

Your mortgage loan type determines how much you need to put down on your home. For conventional loans, a 20% down payment is standard. However, you can pay less than 20% if you buy private mortgage insurance (PMI).

However, some mortgage types, such as VA home loans, don’t need a down payment. Therefore, it all boils down to your lender, chosen loan type and creditworthiness.

Higher down payments can give you lower interest rates. When you have lower rates, your monthly payments and your loan's overall cost will be less expensive.

Private mortgage insurance (PMI) reduces the risk for lenders in case a borrower stops paying their loans or dies, among other contingencies. The primary purpose of this kind of insurance is to protect the lender.

Borrowers who put down less than 20% of the purchase price on a conventional loan must buy PMI. For FHA loans, you must pay an upfront mortgage insurance premium, but PMI is not required. Similarly, USDA loans don’t necessitate PMI but do require you to pay a guarantee fee with your monthly payments.

Finally, VA loans do not require mortgage insurance.

You might be able to get aid for your down payment in Washington. The government has initiatives to help those who want to purchase a house, especially first-time homebuyers. Take a look at the available programs for down payment assistance in this state.

• Home Advantage: This program from the Washington State Housing Finance Commission (WSHFC) helps people qualify for good interest rates on home loans and also provides up to 4% down payment assistance.
• Opportunity: The WSHFC also offers this second mortgage loan program that provides up to $15,000 in down payment assistance with a 1% interest rate, deferred for 30 years. In addition, veterans can qualify with no financial assessment.

The pre-approval procedure will go more quickly and easily if you’ve already prepared your documents. Lenders typically want proof of your name, address and income. As a result, they may require you to submit these supporting documents:

• Tax returns
• W-2 forms
• Pay stubs
• Bank account statements
• Investment statements
• Driver's license
• Social Security number

Keep in mind that your lender might require additional information beyond the listed items. For instance, self-employed individuals will likely need to submit documents detailing their income, profit, loss, accounts receivable and more. This is because self-employed people can have less steady and predictable income.

Your pre-approval is a crucial step in the process. It verifies your creditworthiness and informs lenders that you’re a good candidate for a loan. However, it doesn’t guarantee that you will be approved for a mortgage.

Pre-approval requires proof of your identification and credit history. Your pre-approval letter will typically be available within 10 business days of submitting these documents. In most cases, this letter is good for up to 90 days.

During this period, you can use the letter as a supporting document when viewing and making offers on homes. This letter indicates the maximum loan amount that you can borrow, helping you make an appealing offer on a house.

A pre-approval letter will specify your maximum loan amount. It indicates that a lender has looked through your credit record and determined that you may move forward with your loan application. As a result, sellers may deem you to be a serious and trustworthy buyer.

The duration of the pre-approval letter means that you should find a house within this period. The letter has a 90-day maximum validity period, although some pre-approvals are only valid for up to 60 days. If you need more time to shop for a house, you can seek a renewal. You can be pre-approved by multiple lenders, but they can conduct a hard credit check which can negatively affect your credit score.

A regular person could miss some issues when checking the house. A licensed home inspector can conduct a thorough check of the entire house for any potential problems. The parts of the house that need to be inspected include the following:

• Roof
• Exterior
• Basement, foundation and crawlspace
• Heating
• Cooling
• Plumbing
• Electrical
• Fireplace
• Attic, insulation and ventilation
• Doors, windows and interiors

By conducting a proper home inspection, you can set aside your worries about the home’s safety. Hiring a licensed home inspector can assure you that the house is free from significant flaws that can lead to further problems after you move in.

Typically, you aren’t legally required to conduct a home inspection before buying a house in Washington. However, it’s a smart move to have one since it can expose hidden problems in the house. Some lenders might also ask for a house inspection as part of the application process.

In Washington, home inspectors have to follow certain guidelines to receive their licenses and maintain them. They need to have 40 hours of field training and experience, take exams and complete at least 120 hours of education courses. They also need to renew their licenses every other year. Therefore, hiring a licensed home inspector gives you the assurance that your home is thoroughly checked by a professional.

Home appraisal and home inspection are two different things. In short, an appraiser is concerned with the market value of the house, while an inspector focuses on the home’s safety.

The value of the home in relation to its current condition is important in appraisals. Appraisers also take into account the cost of homes on the local market as well as the current cost of building a similar house.

Mortgage lenders will always require a home appraisal to make sure the home is worth as much as the buyer wants to borrow. If the appraisal comes in low, the transaction may encounter delays. The lender can even cancel the transaction if there is too much of a difference in prices.

You need to prepare and sign a bunch of documents. Have the following documents ready when closing your mortgage loan:

• Deed of trust
• Property deed
• Closing disclosure
• Promissory note
• Proof of wire transfer or a cashier’s check

Processing this paperwork in advance can save you time, effort and headaches when closing your mortgage loan. More importantly, check the details of every document that you sign. This will prevent unwanted issues in the future. It’s best to make sure that you don’t overlook anything — not even the tiniest detail of the agreement.

Closing costs are normally between 2% and 6% of the price of your home, although these rates can vary. Some of these expenses you can expect when you close your mortgage loan include:

• Credit report fee: This covers the expenses for the lender to pull your credit report.
• Discount points: You can buy upfront discount points to lower your mortgage interest rate.
• Prepaid interest: You will owe interest accrued between the closing date and the end of the month.
• Appraisal fee: This is the amount you will pay to have an appraiser assess the home.
• Origination fee: You may need to pay this fee to the lender in exchange for having them set up your mortgage.
• Third-party fees: These can include legal fees, specialty inspection charges, recording fees, title insurance premiums and more, depending on the specifics of your transaction.

Before moving into your new home, you must finish the entire process of closing your mortgage loan. Important documents need to be submitted to your lender, and several costs need to be covered.

Taking out a mortgage loan is a long-term commitment, and your obligations don't end when you get the money. You are required to pay back your debts on a monthly basis during the loan period. Therefore, it’s important to take the necessary steps to manage your finances.

You also need to maintain your home, a process that will always require at least a little bit of your time and attention. It’s a good idea to save some money for unexpected repairs and maintenance expenses.