Your Mortgage Options In Washington State
Types of Mortgages
There are two categories of mortgages available to homeowners – conventional and government home loans.
Conventional loans are not insured or backed by the federal government. This means that, unlike federally insured loans, conventional loans do not carry a guarantee of repayment for the lender should you fail to make the required payments.
However, if a buyer doesn’t reach the necessary loan-to-value ratio (80 percent) by putting down a large enough initial down payment, they will need to acquire private mortgage insurance (PMI), which provides conventional lenders some degree of security. Once a borrower has reached the necessary loan-to-value ratio they can drop their PMI.
Because these loans pose a higher risk for lenders, they are more difficult to qualify for. Typically, credit and income requirements are stricter for conventional loans than government loans.
Government loans are backed by various federal departments. Since these loans are insured, lenders offer low down payments and other benefits, making these loans more easily attainable and putting home purchase in reach of a greater number of people. Government loans are easier to qualify for because the government guarantees the lender will receive payment even if you default on your loan.
Conventional Mortgage Options
Option #1 | Fixed Rate Mortgage
Fixed rate mortgages provide stability and protect against inflation. This kind of mortgage also helps people successfully budget for the long term due to the static nature of the loan payments.
With a fixed rate mortgage, interest will remain the same for the life of the loan. Most people choose this type of loan if they intend to own their property for more than seven years.
Option #2 | Adjustable Rate Mortgage
Adjustable rate mortgages are best for people who plan to move within a few years of their home purchase. With this loan, the size of your monthly payment will change over time, usually after a set period of a lower fixed rate at the beginning of the loan’s term. While adjustable rate mortgages can be unpredictable, many people don’t realize that they will decrease your overall interest payments within the first few years.
Interest rates for these types of loans are generally lower in the beginning compared to those for a 30- year fixed rate loan.
Before deciding which conventional mortgage is right for you, it is important to gain an understanding of current mortgage rates, research expert opinion regarding their potential for rising or falling in the future and consider how long you plan to own your property.
Government Loan Options
Option #3 | Federal Housing Administration (FHA) Loan
FHA loans are most popular among first-time homebuyers. Applicants with a credit score of 580 or higher can make down payments of as little as 3.5 percent. The FHA will back applicants with credit scores of 500 or lower, but will require a 10 percent down payment in these situations.
Option #4 | Veterans Affairs (VA) Loan
Veterans, service members and their surviving spouses can receive help purchasing a home from the VA. With competitive interest rates and no down payment or mortgage insurance requirement, these loans are among the most generous. There isn’t an official minimum credit score; however, most VA-approved lenders require a score of 640 or higher.
Option #5 | United States Department of Agriculture (USDA) Loan
Rural homebuyers can benefit from a USDA loan. This loan offers a zero down payment mortgage issued through the USDA Rural Development Guaranteed Housing Loan Program. Streamlined processing is available for applicants with a credit score of 640 or higher.
Those with lower scores must meet more stringent underwriting standards. There are also income limitations that vary by region.
Mortgage Options for First-Time Washington Homebuyers
What many people might not know is that there are several state mortgage options tailored to first-time homebuyers in the Evergreen State.
Home Advantage DPA #1
This state program offers up to 5 percent down payment assistance, depending on the loan you choose.
The Home Advantage DPA #1 is a 0 percent interest loan with deferred payment for 30 years. If you sell the home or refinance your mortgage, repayment will be due sooner.
Home Advantage DPA #2
Much like the Home Advantage DPA #1, this program offers $10,000 down payment assistance with needs-based qualifications. Borrowers entitled to VA loans are exempt from some qualifying restrictions.
First-time homebuyers or those living in certain areas of the state can receive down payment assistance of up to $10,000 provided with a 1 percent interest rate. Repayment is deferred for 30 years.
Borrowers with a disability or caregivers who have a disabled family member living with them qualify for HomeChoice. This program provides up to $15,000 in down payment assistance and a 1 percent interest rate deferred second mortgage.
House Key Veterans Program
Military veterans and current or former members of the Washington National Guard or Reserve can receive $10,000 in down payment assistance. This loan is structured as a second mortgage with a 3 percent interest rate and deferred payment for up to 30 years.
Need Help Choosing a Home Loan?
From Bellingham, Washington to Seaside, Oregon, the experienced lenders at Bank of the Pacific are here to recommend the best home loan for your situation. Buying a home is a huge life decision that you shouldn’t have to make alone. Our specialists are here to help you navigate the home loan process so you can successfully purchase your dream home.
Financial assistance is just a few clicks away. Contact your nearest lender online or call 360-647-6000 today!