The decision to buy a home in Seattle's vibrant - or maybe “cutthroat” is a better word - market can be as exciting but daunting. Here at A Home in Seattle our goal is to remove the unknowns so you can move along the path towards home ownership with confidence and the knowledge you need to make smart decisions. In this article, we will take you through some of the broad concepts you’ll need to understand as you think about purchasing a home.
Down Payment
It is a myth that you need 20% down in order to buy a home. For conventional loans, the minimum down payment is usually 5%, and it can be as low as 3% for first time home buyers. Very few people we work with here in Seattle put 20% down on their first home. That’s because it’s a financially better move to get in the game and enjoy the benefits of appreciation, rather than wait until you have saved enough to put 20% down.
If you put less than 20% down, you will pay Private Mortgage Insurance (PMI). While PMI adds to your monthly mortgage burden, it's not a perpetual cost. Once you've paid down your loan to 80% of the home's value, PMI drops off, lowering your monthly expenses. Many people wait to buy a home because they are afraid of paying PMI. However, PMI is approximately 1% of the loan per year. So if you purchase a $700,000 home, your annual PMI payment will be about $7,000. In Seattle, your home will appreciate by much more than $7,000/year.
Lending
Pre-approval for a loan is crucial before house hunting. It not only streamlines the process but also gives you an edge in competitive offer situations. Your lender will assess your financial health to determine what you qualify for.
Don’t have a lender? Reach out to one of my favorite local lenders, or ask your friends and coworkers for recommendations. It doesn’t hurt to get a few different quotes, but I always recommend a local lender over a big bank. They are able to move much more quickly, which is essential in this competitive market. If any surprise issues come up with the home you want to buy, or with your loan, a local lender is much more likely to be able to overcome obstacles and close on your loan.
Fees
There are other expenses to consider, outside of your down payment. Lenders charge fees (or “points”) which are calculated as a percentage of your loan. Home inspections vary in cost from about $400-$1,000. You may be responsible for closing costs, such as appraisal fees, attorney fees, and escrow fees.
Remember that you’re also responsible for homeowners insurance, property taxes and, in some cases, HOA dues. It’s important to know ALL your expenses in order to truly understand the cost of homeownership.
As your Realtor, I work with your lender to help you get your head around all these line items. By the way, working with a Realtor as a buyer usually comes at no cost to you upfront. Typically the seller pays Realtor fees for both sides of the transaction.
House Hunting: Price, Condition, Location
The home search involves balancing price, condition, and location. Rarely does one find a home that ticks all boxes, making compromises inevitable. As your Rrealtor, I help you navigate these choices, finding a balance that suits your needs and budget.
I once worked with a young couple, eager first-time homebuyers, who dreamed of a quaint home near Seattle’s bustling downtown. Their budget, however, was more aligned with properties in the city's outskirts. The challenge was to find a middle ground without compromising their aspirations.
We explored various neighborhoods, weighing the pros and cons of each. Finally, we found a charming, slightly dated home in a promising area. It was within their budget but needed some cosmetic work. The couple saw potential and with guidance on budgeting for renovations, they made an offer. Navigating through negotiations and inspections, they eventually moved into a home they adored, transforming it over time into their dream space.
Making an Offer
Making an offer is a delicate balance of monetary considerations and contingencies. Contingencies offer protection to you as the buyer, but can make your offer less appealing to sellers. Common contingencies include those for inspections, financing, and, in some cases, the sale of a current home. It’s extremely important to have an experienced Realtor crafting offers on your behalf.
Offer Acceptance
In most cases, we will conduct a home inspection after your offer is accepted. This allows you to walk in to your home purchase with eyes wide open, knowing all the issues and potential issues with the home. (And there are always issues!) This will also typically be a time where we continue to negotiate with the seller based on the findings of our home inspection.
The appraisal is another key step, ensuring the home's value aligns with your offer. If an appraisal comes in low, renegotiation or additional cash contributions might be necessary.
Finally, the title and escrow process transfers ownership and funds.There's not much for you to do as a buyer during this process. Just be available for phone calls and emails. And make sure to sign any paperwork that comes your way. If you can help it, don't plan any really big trips during this process. (I once visited family in London while we were trying to buy a house, and it complicated things a little bit.
The day your offer is accepted to the day you get your keys is typically around 30 days, though timing can vary. The day of closing marks the official transfer of ownership. The pride of homeownership in Seattle is profound. It’s not just a place to live but an investment in your future.
If you are thinking about making a home in Seattle, send me a message! I’d love to chat more about your goals and vision for your future in the beautiful Pacific Northwest.
