Probably the most asked question by any home buyer that hasn’t bought a home in recent years is; How much money should I save before buying a home? The answer to this question, isn’t straightforward but is also not that complicated. A lot of this has to do with the type of loan that you are requesting. So, let’s start their first.
Different types of loans, require a different amount of money down. Now within a loan type there are multiple options that won’t be discussed here, I will talk about the most common options. I would recommend to reach out to your lender if you would like to know what option is best for you.
Down payment: 0% required
Closing costs: 2.5% – 4%
Total: 2.5% – 4%
Down payment: 3.5% required
Closing costs: 2.5% – 4%
Total: 6% – 7.5%
Conventional loan 97:
Down payment: 3% required
Closing costs: 2.5%-4%
Total: 5.5% – 7%
(Loan size may not $510,400, and the property must be a single-unit dwelling)
Down payment: 5% (Most Typical)
Closing costs: 2.5%-4%
Total: 7.5% – 9%
The big 20% myth
As you can see for none of these loans you need the famous 20% down. Why is it, that we always hear that you need 20% down? Well, that’s because of the Private Mortgage Insurance (PMI). The PMI protects the lender in the event of a foreclosure. You don’t have to pay a PMI if you have a loan-to-value (LTV) ratio of 80% or lower. The cost of a PMI shouldn’t be a reason not to buy, since in many cases this is insignificant in the whole picture. While you are saving for a home, the home prices are going up. This means that it might be smarter to go with a lower down payment for now and pay the PMI. Over time you will get to the 80% LTV and don’t have to pay for the PMI.
Earnest money is a deposit made to a seller, that represents a buyer’s good faith to buy a home. The earnest money could be any kind of amount. But the more earnest money you deposit, the stronger an offer will be. Keep in mind that in Washington state the seller, in most cases, cannot keep more than 5% of the earnest money if you back out of the deal without a valid reason. A good amount for the earnest money is typically 3%.
On the day of closing the earnest money will be used towards the loan, either for the down payment, the closing costs or a combination. Any excess earnest money will be returned to you.
Upon buying a home, it is always smart to do an inspection. The inspection prices are based on square footage, but a good rule of thumb is that it would cost around $500 USD to do an inspection. This might be higher and this might be lower in some cases. It would also be wise to save up for more than one inspection in case you need to add additional inspections.
As you can tell, depending on your situation you might be able to buy a home with only 2.5% of the purchase price. But in most cases 7.5% – 9% would be a good rule of thumb to aim for. But to be completely sure, talk to your lender first to see what your situation is and to develop a plan so that you know how much money you should save before buying a house.
Looking for a lender or just want to talk about buying or selling a home? Contact me!
Being a dad myself, I would like to know what the safest neighborhoods in Seattle are. After all my kid’s safety is most important to me than anything else.
Since I was curious about this and I figured you might as well, I compiled a list of the top 5 safest neighborhoods in Seattle And the five least safest neighborhoods in Seattle which you definitely should avoid if at all possible based on the data provided by the Seattle Police Department. I also included a map so that you can see where these areas are.
Let’s Start with the 5 safest neighborhoods in Seattle:
1. Pigeon Point, with only 78 total crimes over 2019. This is definitely the safest area to live in.
2. Eastlake East, has only 102 total crimes over 2019.
3. Genesee, has 132 total crimes over 2019.
4. Madison Park, 189 total crimes over 2019.
5. Hillman City, with 237 crimes over 2019.
Now that we know which areas are the safest, let’s take a look at the area’s you should avoid.
The 5 neighborhoods with the most crime in Seattle:
1. Downtown Commercial, 6080 cases of crime.
2. Capitol Hill, 4241 cases of crime.
3. Northgate, 3906 cases of crime.
4. Queen Anne, 3751 cases of crime.
5. University, 2964 cases of crime.
There is no surprise that the Downtown area is the neighborhood with the highest crime rate. But some areas like Queen Anne are actually rather nice. Queen Anne, consists of lower- and Upper Queen Anne. While most people try to avoid Lower Queen Anne, Upper Queen Anne is actually highly desirable and is a good and safe area to live in.
That being said there are so many pockets with exceptions like these that it is important to get in contact with someone who knows this area, contact me.
The Micro Community Policing Plans
Seattle has a total of 40 main neighborhoods which can be subdivided in many more. The Seattle police department uses The Micro Community Policing Plans (MCPP) which differs from the actual neighborhoods and were defined through police-citizen engagement including community meetings, focus groups, survey data, and the realities of geographic boundaries SPD can use to collect and report on events.
For the results the 2 main commercial zones have been left out since there is barely any housing there.
For more info on the MCPP: https://www.seattle.gov/police/community-policing/mcpp
Here is the full list of every neighborhood:
|Neighborhoods||Total Cases of Crime|
|Commercial Harbor Island||34|
|Lakewood Sewer Park||250|
|South Beacon Hill||268|
|Judkins Park/ North Beacon Hill||269|
|Claremont/ Rainier Vista||345|
|Montlake/ Portage Bay||388|
|Mid Beacon Hill||587|
|Roxhill/ Westwood/ Arbor Heights||1112|
|North Beacon Hill||1219|
|Central Area/ Square Park||1596|
|Chinatown/ International District||2183|
|South Lake Union/ Cascade||2963|