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Buying a home in Washington
According to Zillow, the typical home value in Washington state is higher than the typical value of $272,446 across the US. The typical home value in Washington is $478,015, and home values have increased 13.3% over the past year.
Washington first-time homebuyer programs
If you get a mortgage from a participating lender, you may be eligible for financial assistance through the Washington State Housing Finance Commission. Here are your options:
- Home Advantage Down Payment Assistance: Borrow up to 5% of the amount of your mortgage for down payment assistance. You won’t pay any interest on this loan, and repayment is deferred for 30 years.
- Home Advantage DPA Needs-based Option: If you earn a low-to-moderate income, you might be able to borrow $10,000 for down payment assistance. You’ll repay the loan after 30 years and pay a 1% interest rate.
- Opportunities DPA: If you get an Opportunity mortgage, you can receive up to $10,000 toward a down payment and pay off the loan over 30 years at a 1% rate.
- Veterans DPA: You can borrow up to $10,000 for a down payment as a military veteran. You’ll repay the loan after 30 years at a 3% interest rate.
- HomeChoice DPA: You can borrow up to $15,000 for down payment assistance if someone living in the house has a disability. You’ll repay the loan after 30 years or when you sell or refinance, and you’ll pay a 1% rate.
- Federal Housing Administration mortgage: You can get a down payment of 3.5% with a credit score of at least 580, or get a mortgage with a credit score between 500 and 580 with 10% down using this loan, which is also called an FHA loan.
- United States Department of Agriculture mortgage: These loans, also called USDA loans, can be useful if you are a low-to-moderate income borrower looking to buy a home in a rural or suburban area.
- Veterans Affairs mortgage: These mortgages, also called VA loans, are for active-service military members or veterans, or spouses of members who have died and can provide lower interest rates than conventional mortgages.
The WSHFC also lists programs for residents of specific cities and counties across Washington.
Refinancing your mortgage in Washington
Mortgage refinance rates are low these days, so it could be a good time to refinance your current mortgage into one with a lower interest rate — especially if the new rate would be significantly lower.
You might end up refinancing with the same lender that gave you your original mortgage, but it’s not always the best idea. A different company could offer you a lower rate the second time around. Shop around for a lender that will offer the best interest rate and charge relatively low fees.
How to get a low interest rate on your mortgage
Here are some tips for landing a good interest rate on your mortgage:
- Save for a down payment. With a conventional loan, you may be able to put down as little as 3%. But the higher your down payment, the lower your rate will likely be. Rates should stay low for a while, so you probably have time to save more.
- Increase your credit score. Many lenders require a minimum credit score of 620 to receive a mortgage. But the higher your score, the better your rate will be. To improve your credit score, be sure to pay all your bills on time. You can also pay down debts or let your credit age.
- Lower your debt-to-income ratio. Your DTI is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI of 36% or less, but an even lower DTI can result in a better rate. To improve your DTI, pay down debts or figure out whether you can earn more money.
- Choose a federally backed mortgage. If you’re eligible, you might consider a USDA loan (for low-to-moderate-income borrowers buying in a rural area), a VA loan (for military members and veterans), or an FHA loan (not designated for any particular group). These loans typically come with lower interest rates than conventional mortgages. As a bonus, you won’t need a down payment for USDA or VA loans.
Improving your financial situation and choosing the right type of mortgage for your needs can help you get the best interest rate possible.
Historic mortgage rates for Washington
By looking at the average mortgage rates in Washington state since 2010, you can see trends for 30-year fixed mortgages, 15-year fixed mortgages, and 7/1 adjustable mortgages:
Seeing how today’s rates compare to historic Washington mortgage rates may help you decide whether you’d be getting a good deal by getting a mortgage or refinancing now.
How 30-year fixed mortgage rates work
A 30-year fixed mortgage comes with a higher interest rate than a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but 30-year terms have become the better deal recently.
Your monthly payments on a 30-year term will be lower than on a shorter-term mortgage. You’re spreading payments out over a longer period of time, so you’ll pay less each month.
You’ll pay more in interest in the long term with a 30-year term than you would for a 15-year mortgage, because a) the rate is higher, and b) you’ll be paying interest for longer.
How 15-year fixed mortgage rates work
The 15-year fixed-rate mortgages are more affordable than 30-year terms in the long run. You’ll pay a lower interest rate on a 15-year term, and you’ll pay off the mortgage in half the time.
Your monthly payments will be higher for a 15-year mortgage than for a 30-year mortgage, though. You’re paying off the same loan principal in a shorter amount of time, so you’ll pay more every month.
How ARMs work
With an adjustable-rate loan, your rate stays the same for the first few years, then changes periodically. For example, your rate is locked in for the first five years on a 5/1 ARM, then your rate increases or decreases once per year.
ARM rates are at all-time lows right now, but a fixed-rate mortgage is still the better deal. The 30-year fixed rates are comparable to or lower than ARM rates. It could be in your best interest to lock in a low rate with a 30-year or 15-year fixed-rate mortgage rather than risk your rate increasing later with an ARM.
If you’re considering an ARM, you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus an adjustable-rate mortgage.
Mortgage and refinance rates by state
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