First time buyer advice in Seattle area

13 Replies

Hey!

I am a 28 yo who has lived in the Seattle area for the past 15-20 years and have seen this area's prices go out of control in the last few years especially. My wife, new daughter, and I are looking to purchase somewhere in the Woodinville, Bothel, Snohomish areas as they are really the only places within our budget. I mostly wanted to ask for people's advice on 1) How are other first time home buyers able to compete in this market? and 2) What kind of loan do you think I should try to get. I know I should just go to a lender, but before I try to do that I wanted some unbiased advice from here if possible. Here is our info:

Credit score: 750+

Household Income: ~210k

Downpayment funds: 30-40k depending on how much we want to stretch our budget

Debt: I have about $25k left in student loans that I have vigorously been paying off $1000/month (started at around $70k) since I graduated 5 years ago. Also have about $35k in loans for an SUV  (probably didn't need the 4Runner, I know)

From what I've read, I can get a conventional loan as long as I put at least 5% down, correct? So I think I could afford something between $500-600k and get us the 3-4 bedrooms we are looking for.  Are there any major benefits with doing the conventional over and FHA? I read refinancing can be easier with FHA and you could put down less (3.5%) which gives us more to work with for any maintenance/repair costs.

The easy answer might just be to "go see a lender", but I just figured I would get some advice from the experienced people here.

Thanks for any input,

Matt

Matt - there are conventional loans that allow a 3% down payment . The fha loans require 3.5% down but the mortgage insurance is permanent on these so try to avoid fha if possible . Get pre approved as it's free and also this will make you more aware of the numbers and options plus make you prepared if you see a place you like . The market is not as competitive as it was a yr ago

@Matthew Hintzke

FHA requires upfront mortgage insurance as well as an annual insurance. As mentioned, the mortgage insurance stays for the life of the loan.

There is a first time home buyer conventional product for only 3% down. If you are not a first time home buyer then you are required to put 5% down.

If you planning to purchase a property  below market value that needs fixing up, than there are some renovation loan options that also include the renovations. 

Sounds like you've got a pretty good plan. I'm in a similar situation and bought just over a year ago in Kent.

Also, make sure you do talk to a mortgage broker sooner rather than later: You're getting into jumbo loan territory... I don't remember if that is FHA capable or not. My options were pretty limited because I only used one credit card mostly (each lender has their own specific and arbitrary conditions/filters). My broker said all I needed to do to get more options for a loan was to have swiped another one of my cards at least once in the past couple of months. So... Talk to a lender. Talk to a couple. Don't let them run credit checks until you're ready to decide on one... Those checks stay on your report for like 2 years and you don't want a ton all at once as that will tank your score.

Hi and thanks for all of the quick responses!

@Dave Skow - I did not know you could go as low as 3%. Is that a special kind of conventional? Also, I am still a little confused around how PMI works. I thought PMI was needed if you are under 20% no matter what type of loan you get. Is that not true then? I would love to avoid PMI if possible, but I didn't think it would be unless had like 100K to put down on a 500K house which is just too much.

@Jerry Padilla - are you referring to a 203K loan? I remember reading about that in a book, but thought that it required some major pre-requisites before doing so, but I will have to look into that if we can find a fixer-upper.

@Matt_Hintske – thanks for the reply … There is a first time home buyer conventional product for only 3% down you have to be a first time home buyer ( which I think you are ) …this program does have mortgage insurance and its actually alittle higher than what the mtg ins would be if you were to have a 5% down payment but the goods new on this is * the mtg ins would be lower than FHA mortgage insurance * the mortgage insurance will eventually drop away or you can ask for it to be removed when your equity position improves …..Regarding avoiding mtg ins – there are ways to do this , but you would need t pay a higher fee or take a higher rate so its almost like “cutting off you nose to spite your face”

@Dave Skow - ok that makes sense. I know we can put down 5% on a house we can afford the monthly mortage + taxes on, so I think I will go that route, but I will still need to pay PMI.. you are just saying PMI on a 5% conventional is lower than PMI on a 5% (or 3.5%) FHA, correct?

yes - PMI needed on a 5% down scenario I.. and yes saying PMI on a 5% conventional is lower than PMI on a 5% or 3% conventional and also lower than the FHA option :)

@Matthew Hintzke definitely talk with a few lenders. I have a couple I recommend, and recently talked with both of them about my refi. Happy to refer you, just PM me. My understanding on credit pulls is if you are doing a bunch within a certain timeframe, it only counts as one so wouldn't tank the credit score, but you should probably confirm/do some research. 

Finally, depending on where you work, maybe consider Kitsap County. We moved over to Poulsbo last year and love it here. I go to Seattle and the Eastside once/week or so. Ferry commute is quite nice. There are also the fast ferries from Kingston and Bremerton to downtown Seattle. Prices are WAY more affordable here, and it's quiet. 

But if you work in Redmond and can't work from home at least part of the week, it would be tough. If you ARE interested in learning more though, just ping me. Happy to share stats and knowledge. 

Good luck!

@Matthew Hintzke talk to a lender and let them know what you're interested in :) I just closed on a property in Idaho with 10% down, no PMI with a residential mortgage.. there are lots of variables to play with and lots of options. It depends on what you're interested in and what the individual lender can offer based on a variety of factors.

Don't let PMI drive your decision. If you get a sweet deal that works out with tons of cash flow with an FHA mortgage, who cares that there's PMI that you can refi out of later? Don't let the tail wag the dog :)

For competing with other buyers, I'd try networking for off market deals, as there's less competition off the mls

@Matthew Hintzke

The HomeStyle Renovation loan is another option. Here is an overview with some more info. 

HomeStyle Renovation Loan 

Product Overview

  • Combines home purchase or refinance (limited cash out) with home improvement financing in one loan with one closing
  • Provides a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 75% of the "as-completed" appraised value of the property with a first mortgage, rather than a second mortgage, HELOC, or other more costly financing method.
  • Funds can be used for repairs or renovations that are permanently affixed and add value to the property.
  • Primary residences as well as second homes and investment properties are eligible.
  • Maximum of 4 financed properties including subject property, on second homes and investment properties. No limit on primary residences.
  • NO MOBILE/MANUFACTURED HOMES

Required LTV's:

Primary Homes:

-1-4 Units

-620 FICO Minimum (660 High Balance)

-97% LTV 1 Unit with standard conforming only and buyer must be a first time home buyer, or a limited cash out refinance (high balance and buyers that are not considered a first time home buyer - 95% max LTV)

-85% LTV 2 Unit

-75% LTV 3-4 Unit

- Minimum 620 Credit score

-2-4 units require 6 months reserves

Second Homes

-1 Unit - 90% LTV

- 620 FICO Minimum

- Minimum 2 months reserves

Investment Properties:

-1 Unit - 85% LTV Purchase Only (75% LTV Limited Cash Out)

- 620 FICO Minimum

- Minimum 6 months reserves

- Minimum $50k loan amount

-2-4 Unit Investment Properties - NOT ALLOWED WITH THIS PRODUCT!

Allowable Repairs or Renovations

  • Funds can be used for any repairs or renovations that are permanently affixed and add value to the property.
  • Allowable repairs or renovations include, but are not limited to:
    • Installation of an “in-ground” swimming pool
      • Outdoor living areas are also eligible along with the pool installation
    • Subject property cannot be an unfinished model home or unfinished new construction.
    • Kitchen appliances (i.e. cooktop/ovens/stove/refrigerator/dishwasher) may be included only as built-in fixtures (attached to property - cannot be removed) in connection with a total kitchen renovation that includes new cabinetry and countertops. Eligibility will be determined by the Renovation Department on a case-by-case basis. Washers and dryers are not included - no exceptions.

-Properties requiring foundation or structural repairs require a foundation or structural report from a licensed engineer. Some examples include but are not limited to additional square footage being added, garage additions with new foundations, cracks or settlement.