How to Buy a House in Washington: 6 Steps

Purchasing a house is a significant financial commitment that requires careful planning. In Washington, the average home value is $600,843, notably higher than the national average of $362,481. This disparity underscores the importance of understanding the financial landscape before making such a decision.

Understanding down payment assistance programs, mortgage types and Washington's specific regulations can aid in a seamless transition to homeownership in the Evergreen State. MoneyGeek offers essential pointers to navigate home buying, from saving for a down payment to securing the best financing option tailored to your needs and credit history.

According to the U.S. Census Bureau, the homeowner vacancy rate in Washington for the second quarter of 2024 was 1.1%. The homeowner vacancy rate measures the percentage of vacant homes available for sale and gauges the balance between housing supply and demand.

A stable homeowner vacancy rate is around 2%, which allows homebuyers some choice and flexibility. Washington's rate means there may not be enough homes on the market to satisfy all potential buyers or might face competition when they find a suitable property.

Before purchasing a home in Washington, examining your financial and credit history is important. Lenders look at credit score, income and debt levels to assess your ability to repay a loan and improve your chances of getting approved when applying for a mortgage.

Your credit score is pivotal in determining the mortgage loans and interest rates you qualify for. A higher score increases your chances of securing a reasonable rate. As of the third quarter of 2023, the average credit score in Washington was 735, according to Experian.

If you have bad credit, defined by the FICO scale as a score between 300 and 579, buying a house is possible, but getting approved for a mortgage may be challenging. Check the table below for the ideal mortgage type based on the minimum credit score requirements.

Source: Experian

Your debt-to-income ratio determines how much of your monthly income goes toward debt payments. This ratio helps lenders evaluate the amount of mortgage debt you can responsibly take on. In the third quarter of 2023, the average mortgage debt in Washington was $344,397, according to Experian.

Monthly debt payments included in your debt-to-income ratio are mortgages, car loans, student loans and credit card payments. Use our debt-to-income ratio calculator below to see your front-end DTI, which focuses on housing-related debt, and back-end DTI, which includes all monthly debt obligations.

Buying a house you can't afford can lead to financial strain. To avoid this mistake, use the 28% rule. This helpful guideline suggests not spending more than 28% of your monthly income on mortgage payments to ensure your housing expenses remain manageable.

According to the U.S. Bureau of Labor Statistics, the median annual income in Washington in April 2024 was $59,920, or a gross monthly income of $4,993 before taxes. Applying the 28% rule, you should aim to spend no more than $1,398 on monthly mortgage payments.

Use our mortgage calculator below to get a ballpark figure of your monthly mortgage payment in Washington.

A down payment is the initial payment made when purchasing a house, and it plays a crucial role in securing a mortgage. A 20% down payment is the standard, but it can still be a hurdle for many homebuyers. For instance, with the average home value in Washington at $600,843, a 20% down payment would amount to $120,169. If the home value is above average, like $700,000, the 20% down payment would be $140,000.

Fortunately, saving up for a 20% down payment is not a requirement. Many mortgage types allow for lower down payments. For example, government-backed loans like VA loans require no down, while FHA loans require only 3.5%.

It's important to note that if you put down less than 20%, your lender may require you to take out private mortgage insurance. Our PMI calculator can estimate your premium based on your credit score and down payment.

The Washington State Housing Finance Commission (WSHFC) offers financial support to help cover the initial costs of purchasing a home. Please refer to the table below to find the available down payment assistance programs in Washington.

Finding the right location in Washington requires careful consideration of several factors, such as the average house price, proximity to family, friends and work or school and access to public transportation, parks, restaurants and shopping centers.

The cost of living also plays a crucial role in your decision. According to the Missouri Economic Research and Information Center (MERIC), Washington's cost of living index in the first quarter of 2024 was 115.1, higher than the national average of 100. When choosing your new home, consider the following expenses:

• Food
• Health care
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

Check the table below to see the average home values in some cities of Washington based on recent data. You can also use our cost of living calculator to estimate how much to pay for all the essentials in different locations.

Source: Zillow

Collaborating with a real estate agent can accelerate your house hunt in Washington. Agents provide the necessary advice, assist with paperwork, offer access to a broader range of properties and recommend other service providers, such as title companies and inspectors, to facilitate your home purchase.

When selecting a real estate agent, conduct due diligence and interview those with experience in your desired neighborhoods. Consider the following tips:

• Find someone compatible with your needs and personality
• Verify the agent's credentials, training and licensure
• Ensure they have in-depth knowledge of the area
• Shop around for agents and compare their rates

You can also use the license holder search tool from the Washington State Department of Licensing to find or verify real estate agents in Washington.

The homebuying process involves securing the best mortgage you can afford. In Washington, options include conventional, jumbo, FHA, VA and USDA loans. You can also choose from 10-, 15-, 20-or 30-year terms. Deciding between a fixed-rate mortgage or an adjustable-rate mortgage (ARM) is another crucial step. Selecting the best financing option not only enhances your approval odds but also saves money in the long run.

Interest rates on mortgages can fluctuate daily due to various factors, including the type of mortgage, the lender and broader economic conditions. While interest rates represent the cost of borrowing as a percentage of the loan amount, the annual percentage rate (APR) includes the interest rate and other costs associated with the loan, offering a clearer picture of the actual cost of borrowing.

As of October 2024, the APR for a 30-year fixed conforming loan in Washington is 5.84%, while the APR for a 30-year fixed-rate FHA loan is 8.00%. The table below shows the current rates in Washington by mortgage type.

Getting pre-approved for a mortgage in Washington can streamline your homebuying journey by determining the loan amount you qualify for. This process involves an evaluation of your financial status, allowing you to focus on homes within your budget. Lenders will issue a pre-approval letter valid for 60 to 90 days, providing a timeframe to find your ideal home.

To obtain a mortgage pre-approval, you need to submit the following documents:

• Proof of income, such as pay stubs or tax returns
• Credit history report
• Identification documents, like a driver's license or passport
• Bank statements
• Employment verification

It's important to distinguish between mortgage pre-approval and prequalification. Pre-approval involves a detailed financial review that gives you a specific loan amount, whereas prequalification is a preliminary assessment based on self-reported information.

Home inspections are highly recommended. They examine various parts of the house, including structural components, electrical systems, plumbing, roofing and HVAC systems. The inspection report provides detailed information about the home's condition and notes potential issues.

If an inspection reveals major issues, such as a faulty foundation or outdated electrical wiring, it could lead to a lower appraisal than anticipated, affecting your financing options. Additionally, you might decide to rescind your offer if the inspection results indicate costly repairs.

In Washington, home inspections are regulated by the Department of Licensing (DOL). Licensed home inspectors are required to adhere to state-specific standards for inspecting house components and systems. Additionally, inspectors must complete 24 hours of continuing education every two years to maintain their license.

If you're looking for a home inspector in Washington, check if they are licensed, read reviews from other clients and ask for references. You can use the DOL's license look-up tool to find or verify licensed home inspectors in Washington.

Home appraisals provide an objective assessment of a property's market value, helping buyers and lenders make informed decisions. According to the 2023 Appraisal Survey from the National Association of Realtors (NAR), the median appraisal cost was $500 in 2023.

While both home inspections and appraisals are necessary, they serve different purposes. A home appraisal determines the property's value, whereas an inspection evaluates its physical condition. Lenders require appraisals to ensure the property's value supports the loan amount, reducing their financial risk.

Closing is the final step in buying a house in Washington, marking the official transfer of ownership and the moment you receive the keys. Your lender must provide a closing disclosure document three days before the closing meeting. This document outlines your loan terms, monthly payments and closing costs. Plan a final walk-through of the property with your real estate agent near closing day to ensure the home is in the expected condition.

Closing day involves reviewing and completing various paperwork essential to finalizing your home purchase. Below are some of the documents you will need to sign:

• Final loan application: This document confirms your financial details and loan terms. It ensures that all information is accurate and up to date before finalizing the mortgage.
• Deed transfer: This legal document officially transfers ownership of the property from the seller to you. It is recorded with the local government to establish your ownership rights.
• Promissory mortgage note: This document is a promise that you will repay the loan according to the agreed terms. It outlines the repayment schedule, interest rate and other loan conditions.
• Homeowners insurance: Homeowners insurance in Washington can protect your new home from potential risks like fire, theft and natural disasters.

Closing costs are the fees you pay when finalizing a real estate transaction. According to NAR, the average closing cost in Washington is $6,966, and may include:

• Appraisal fee: This covers the cost of a professional appraiser's property assessment to determine its market value.
• Title search and insurance fee: This fee pays for a search to ensure the title to the property is clear of liens and for insurance to protect against future claims.
• Escrow deposit: This involves setting aside funds for property taxes and insurance premiums to be paid when due.
• Prepaid costs: These are upfront payments for items like homeowner's insurance and property taxes.
• Other closing costs: This category can include a variety of additional fees, such as recording fees and attorney fees.

Learning the different first-time homebuyer programs in Washington can help you achieve homeownership faster.

Buying a house in Washington is a significant financial commitment that lasts for years. To kickstart your homebuyer journey, we answered some frequently asked questions about buying a house in Washington.