The pastoral Pacific Northwest has long been a popular place to settle. Now that Seattle is a major tech hub, prices have soared. And the entire state's housing market is on fire. Washington had the nation's third-highest price appreciation for the five years ending in September 2019, according to the Federal Housing Finance Agency. This page will break down what you need to know, step-by-step, on finessing the financing to get a great mortgage in Washington's increasingly challenging housing market.
How to Check Mortgage Rates in Washington
Many things drive mortgage rates: available inventory, the buyer's credit history and available down payment amounts, and other factors. However, rates can only rise as fast as the market will bear and policymakers will allow. Washington residents shoulder the ninth highest mortgage payments in the U.S. an average of $1,131 per month. That accounts for 24 percent of the average income in Washington. For a more detailed explanation of what drives rates, visit our mortgage rate guide.
First-Timer? Homebuying Help in Washington
Washington is extremely friendly to the first-time homebuyer, offering numerous programs to open the door to homeownership. First-time homebuyers, or those buying in targeted areas, may qualify for the Washington State Housing Finance Commission (WSHFC) Opportunity First mortgage loan. This program offers down payment assistance; a second mortgage loan program with a one percent interest rate and payment deferred for 30 years, up to $10,000. This combines with the House Key Opportunity first mortgage loan program, an FHA loan offering a three percent fixed- rate and a conventional fixed rate of 3.25 percent. Likewise, qualified borrowers with a disability, or living with a person who has a disability, may qualify for the Home Choice Down Payment Assistance program, which provides funds up to $15,000 that can be used for down payments. One-on-one counseling is required and a list of counseling providers can be found here.
Margaret Graham of the WSHFC says, "We offer several first-mortgage programs for low- and moderate-income homebuyers. Requirements vary, however borrowers must have a credit score of 620 and be able to qualify for a mortgage loan through a Commission-trained lender. They also must take one of our homebuyer education classes as mentioned above. Our programs work with conventional mortgages as well as FHA, VA, USDA Rural Development, and other programs. Mortgage insurance is required for conventional loans with a loan-to-value ratio higher than 80 percent."
For an in-depth explanation of the homebuying process, see MoneyGeek's first-time buyers guide.
Financial Assistance in Washington for First-Time Buyers
Everything the first-time Washington homebuyer might need, from down payment assistance to closing cost help, is available in the tool below:
Find a Housing Counselor in Washington
Understanding Home Affordability in Washington
The more people who want to live in a particular area, the more intensely house prices rise. But prices can only rise in accord with how much people can afford to pay. With Seattle-based tech companies such as Amazon, Micrcosoft and Zillow prospering, plenty of workers are doing well. Lisa DeBrock, director of homeownership at the Washington State Housing Finance Commission says not to worry. "Home prices across the state are rising, but they are still affordable in many areas." Stabilizing factors include moderate interest rates, programs that pave the way, and help with down payments and other fees.
How Washington Mortgage Rates and Home Prices Affect Monthly Payments
|Metro Area||Estimated Monthly Mortgage Payment*||Q3 2019 (Change from Previous Year)||2018 Median Home Price||2017||2016|
Source: National Association of Realtors Q3 2019 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q3 2019, a 20 percent down payment and a 30-year fixed mortgage at 3.75 percent. Estimate reflects principal and interest, but not property taxes and insurance.
Determine How Much You Can Borrow in Washington
Conventional loan limits are determined by the county where the home is located, and are set using the highest median home price within the metropolitan area. But your specific loan limit will also be determined by your income and down payment amounts as well as rules of the county where the home is located, using the highest median home price within the metropolitan area. By way of example, Adams County loan limits max out at $331,760 for a single family home in 2020, while Chelan County is at $345,000, and Snohomish County at $741,750 for 2020. FHA limits are based on the Home Price Index (HPI) and are updated every year. Use the tool below to find Washington state loan limits by county.
Buying a Home in Washington: Experts Weigh In
Barry Varshay is a loan officer at HomeStreet Bank in Seattle.
Phil Hills is a mortgage originator at The Sound Mortgage in Seattle.
How has the real estate climate changed in your state, since the market crisis? Is now a better to time to refinance or purchase?
Affordability is an issue, and is likely to get worse before it gets better. Average rents in the Seattle/Bellevue area have gone up between 9 percent and 11 percent. While exotic programs with stated income have all but disappeared, there are numerous options available to low and moderate income families with incomes under $97,000 per year (income limit applies statewide) that would grant down payment assistance to allow a family to purchase a home with very little cash out of pocket.
Seattle is an economy of its own. With the tech business ever growing — including marquee employer such as Amazon, Google, Microsoft and others — Washington as a whole is a very healthy market with low default rates.
Do closing costs differ within different counties and cities in Washington?
Title and escrow fees will vary by county and are generally higher in higher cost areas. Fees are typically lower in Eastern Washington and on the Olympic Peninsula than they are in Seattle/Bellevue/Tacoma.
Closing costs can be substantially different in more expensive counties due to property taxes alone. Closing usually includes opening an escrow account to collect property taxes and homeowners' insurance upfront. I always advise paying no costs at all (out of pocket at closing) and taking a slighter higher rate so I can give a lender credit to pay for all lender fees, third party costs and the setup of an escrow account.
Is there anything unique or uncommon about Washington state's closing costs?
Washington is a title state, so we typically don't have survey or attorney fees for closing. Excise taxes are generally paid by the seller, not the buyer. Washington is a community property state, so a married individual who wishes to purchase as his or her sole property will need spousal consent and will typically have additional documentation fees to prepare necessary quit claim deeds and so on. Property taxes are not based on the sales price as they would be in some other states like California. Each county has its own property tax assessor, and property taxes will be based on the current county tax assessment.
Buyers will pay for any and all costs that come up. This occurs in super-competitive markets where almost 100 percent of listings close well above the starting sales price, meaning a seller will pay no costs and will make out like a bandit. Most people don't want to sell because they can't afford to buy a home where they already live.
Specifics on Washington's Closing Costs
Closing costs in Washington are comparable to what you'll pay in neighboring states like Oregon, running close to $2000, though you can expect to pay more for surveying and attorney fees. Average costs are as follows, with variations possible between counties, so your specific costs may be different: Average Origination Fees: $1,077. Third-Party Fees: $824. Document preparation: $80. Broker fees and commission: $1,129. Tax Service: $76. Appraisal: $448. Attorney: $500. Credit report: $21. Flood Certification: $10. Survey: $900. For a full explanation of closing costs, and what to expect, check out our guide to Common Closing Costs.
Average Closing Costs in the Evergreen State
Source: Bankrate's 2015 survey of closing costs.
Refinancing a Mortgage in Washington
Homeowners refinance for a number of reasons: to save money, get a better interest rate, or to take out home improvement funds. Although interest rates have risen slightly, they are still at historic lows in Washington. Barry Varshay adds, "The refinance market is what I call a "Perfect Storm:" Historic low rates with high equity and an eager bond market to gobble up the US mortgage bonds." Washington's robust market, he says, may be due to the large number of high-paying jobs that attract young professionals.
For more comprehensive information, check out our Refinance Guide.
Other Washington Mortgage Resources
For properties in foreclosure and short sale, up to $60,000 based on eligibility, is a second mortgage and house must pass home inspection by HUD-approved inspector, borrower must complete homebuyer education.
Offers foreclosure counseling and free legal advice to homeowners, along with free workshops for credit repair and other financial counseling.
They represent borrowers in loan modification litigation and provide many resources for borrowers at risk. There are other programs the state offers for borrowers at risk of foreclosure: Partial Claim Program, Property Tax Deferral and Making Home Affordable, to name a few.
They offer assistance finding safe, affordable housing.
Down payment assistance programs.
Home buyer education seminars and homeownership programs for low and moderate income homebuyers.
Resources for people buying a home, facing foreclosure, etc.