The secret behind down payment assistance

It’s no secret how expensive housing has gotten in Western Washington. The days of Tacoma having comparatively affordable housing have gone the way of the 40 minute commute to Seattle…ancient history.

In fact, cities like Tacoma have seen some of the biggest rent increases for our entire region. Because housing supply is nowhere close to meeting the demand of all the new people moving to our region, rent increase rates of at least 6% per year seem likely to be the norm. The average rent for a Tacoma apartment is now $1,323. And if anything, it’s going to continue intensifying.

This really illustrates the key difference between renting and owning: it all comes down to time. When you rent, time is your enemy. Your cost of living will only continue increasing, while wages continue to stagnate. However, if you own the place where you live, time is your ally. Your monthly payments largely stay the same, and with every mortgage payment, you pay off a little debt and build more equity. And in a rising home market, you stand to gain from it by achieving even more equity in your home due to increases in home values.

“But if I can barely afford the rent, how on earth can I afford home ownership,” you might ask?

Enter down payment assistance! The Washington State Housing Finance Commission – as well as Pierce County and many cities in our area – receive federal funding every year to help home buyers get money to make home down payments. The state’s program is especially generous: you can have a household income of up to $145,000 per year and still qualify!

Down payment assistance is basically a second mortgage. You receive a low-interest loan, and then use it to make a down payment on a home along with your main mortgage. In most cases, your payments on the down payment assistance loan are not due until you sell the house.

Even in today’s market…you can technically buy a house with little-to-nothing out of pocket. For example, you could get pre-approved with an FHA home loan and put 3.5% down on a home you like. You then can use down payment assistance to finance that 3.5%. Finally, you can also in some cases ask the seller to pay some or all of your closing costs.

If that sounds insane and impossible in today’s hot market, think again. I recently helped a couple of first-time buyers find a house for nearly $400,000. Between their FHA home loan, down payment assistance, and the seller paying their closing costs, their total out-of-pocket cost for purchasing this home came to under $2,000. And it’s a pretty nice house, too!

So don’t sell yourself short. You’ll never know how much home you can afford until you speak with a lender and come up with a plan. With the average mortgage interest rate at the historic low of 3.6%, this could be a golden opportunity for you. The moment you’ve been waiting for could very well be now.

Anders Ibsen

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