Washington First-Time Home Buying Assistance Programs & Grants for 2023
By Susan Guillory
(Last Updated – 07/2022)
With its abundance of forests, mountains, and water, Washington is an incredibly beautiful state. It’s also a great place to work: The booming tech scene has created numerous job opportunities. It’s no wonder then that so many people, including first-time buyers, are looking to purchase a home in the Evergreen State.The number of houses for sale in Washington increased 8.7% from 2021 to 2022, according to Redfin, a real estate brokerage firm that analyzes housing markets across the country. Those homes sell for an average of $670,300, which is substantially higher than the U.S. average of $453,700.
If you’re a first-time home buyer in Washington, you’ll need to act fast: Homes only stay on the market an average of six days before being sold. Fortunately, there are several first-time home buyer programs in the state that may help you save on your first home.
Recommended: This home buying guide can help walk you through the process of purchasing a house.
Who Is Considered a First-Time Homebuyer in Washington?
In Washington, anyone who hasn’t owned a home in the last three years is considered a first-time homebuyer.
3 Washington Programs for First-Time Homebuyers
First-time home buyer programs in the state may have certain requirements you must qualify for, including income and purchase price. However, if you meet the criteria, you can save on the interest with mortgage loans or get down payment and closing cost assistance.
1. WSHFC: House Key Opportunity Program
The Washington State Housing Finance Commission offers low-interest loans to qualified first-time buyers (meaning those who have never owned a home or haven’t owned and occupied a home in the last three years).
There are income and acquisition cost limits you must meet. Plus you will also need to attend a free Homebuyer Education Seminar offered by WSHFC.
2. WSHFC: Home Advantage Program
This program can help first-time home buyers get a low-interest rate on a mortgage. To be eligible, you must have an annual household income under $160,000.
First, you’ll need to attend a free Homebuyer Education Seminar. Once you receive your certificate of completion, contact a Commission-Trained loan officer to see if you qualify for the program.
3. WSHFC: Down Payment Assistance
If you take out a mortgage through WSHFC, you may also be eligible for its Down Payment Assistance
program , which provides, on average, $10,000 to be used toward a down payment. The loan is often deferred, and you won’t have to pay until the mortgage is paid off or you sell or transfer the property.
How to Apply to Washington Programs for First-Time Homebuyers
First you must meet the program’s qualifications, as outlined above. In addition, you may need to attend a free Homebuyer Education Seminar. The next step in the process is to contact a loan officer trained by the commission to see if you qualify. Find out more at the WSHFC website .
Federal Programs for First-Time Homebuyers
Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.
The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.
Federal Housing Administration (FHA) Loans
The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.
Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.
FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA lending limits in Washington by county on the HUD website .
Freddie Mac Home Possible Mortgages
Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.
The Home Possible mortgage is for buyers who have a credit score of at least 660.
Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.
Fannie Mae HomeReady Mortgages
Fannie Mae, or formally, the Federal National Mortgage Association, is a publicly traded government-sponsored enterprise that dates back to the Great Depression.
Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.
For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .
Fannie Mae Standard 97 LTV Loan
The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.
Unlike an FHA loan, the 97 LTV loan has no upfront mortgage insurance fee and does have cancellable mortgage insurance. The loan is for just one-unit single-family homes, co-ops, condos, and planned unit developments.
Department of Veterans Affairs (VA) Loans
Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. For most applicants, there is a one-time funding fee that can be rolled into the mortgage.
Native American Veteran Direct Loans (NADLs)
Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.
U.S. Department of Agriculture (USDA) Loans
No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.
The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .
HUD Good Neighbor Next Door Program
This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.
There are certain types of mortgage loans that are available to first time home buyers that may offer lower interest rates or down payment assistance.
First-Time Homebuyer Stats for 2022
• First-time homebuyers nationwide: 34% of all home buyers
• Median age of first-time homebuyers in U.S.: 33
• Average down payment in Washington (20%): $115,000
• Average home price in Washington: $575,000
• Average credit score of home buyer in Washington: 734
Financing Tips for First-Time Homebuyers
Now that you know the mortgage basics for a first-time homebuyer in Washington, here are other financial strategies that may help you purchase a house.
• Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.
• Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.
• 401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.
• State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.
• The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.
• Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.
• Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.
Finally, this home affordability calculator can show you how much you can afford to spend on a home.
First-time homebuyers in Washington may qualify for one of the state’s programs designed to help them save money on a mortgage, down payment, and closing costs. There are also other options, including federal and conventional loans, that can help them achieve their goal of owning a home in the Evergreen State.
Should I take first-time homebuyer classes?
Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.
Do first-time homebuyers with bad credit qualify for homeownership assistance?
Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications. That’s why it’s important to take all possible steps to improve your credit standing before you go house hunting.
Is there a first-time homebuyer tax credit in Washington?
Yes, there is a mortgage credit certificate program for first-time homeowners and those who buy in certain areas in Washington. With it, you can claim a portion of your mortgage interest as a tax credit, up to $2,000.
Is there a first-time veteran homebuyer assistance program in Washington?
Yes. The U.S. Department of Veterans Affairs offers home loans to servicemembers, veterans, and eligible surviving spouses.
What credit score do I need for first-time homebuyer assistance in Washington?
Credit score requirements vary, depending on the homebuyer assistance program. For example, the Down Payment Assistance Program offered by WSHFC requires a credit score of 620.
What is the average age of first-time homebuyers in Washington?
Data about first-time homebuyers in Washington is hard to find, but the median age of first-time homebuyers in the U.S. is 33.
Photo credit: iStock/MarkHatfield
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