With its stunning riverfront, expansive parks, and burgeoning arts scene, Spokane offers an enviable quality of life that appeals to many homebuyers. The Spokane real estate market has been consistently stable, with home values appreciating steadily over the years. For first-time homebuyers, you're making a sound investment in your future.
The city's diverse range of properties ensures something for everyone — from charming starter homes to luxury homes. As the market thrives, now is an opportune time to explore the options available and take the first step toward homeownership in this thriving city.
Loan options
Conventional loans are the most common type of mortgage, typically requiring a higher credit score and a larger down payment than other options. They are ideal for borrowers with a stable financial history and sufficient savings, as they often come with competitive interest rates and fewer restrictions on the property type. To qualify, you'll generally need a credit score of 620 or higher, a low debt-to-income ratio, and a down payment of at least 3% to 20%.
FHA loans are a more accessible alternative for those who may not meet the strict criteria of a conventional loan. Backed by the Federal Housing Administration, these loans require a lower down payment — often as low as 3.5% — and are more forgiving of credit imperfections. They are particularly beneficial for first-time homebuyers in Spokane, WA, as they allow them to enter the housing market with less upfront cash. However, borrowers must pay mortgage insurance premiums, which increase the overall cost.
Government-backed loans such as VA loans for veterans and USDA loans for rural properties offer unique benefits, including zero down payment options and competitive interest rates. These loans support specific groups, making homeownership more attainable for eligible buyers. You'll need a Certificate of Eligibility for VA loans, while USDA loans require the property to be in a designated rural area.
Lastly, jumbo loans are tailored for high-value properties that exceed the limits of conventional loans. These loans are for those eyeing Spokane, WA, luxury homes. However, due to the higher risk involved for lenders, they require excellent credit, a significant down payment, and proof of substantial income to qualify.
Getting started
The first step to securing your loan is to seek pre-approval or pre-qualification. Pre-qualification is when a lender estimates how much you can borrow based on unverified financial information. While it helps get a general idea of your budget, pre-approval carries more weight. In pre-approval, the lender thoroughly reviews your financial history, including income, credit score, and debt-to-income ratio, and provides a more accurate loan amount. Having a pre-approval letter in hand signals to sellers that you're a serious buyer, giving you a competitive edge.
You'll need to gather several key documents to move forward with a mortgage application. These include proof of income (such as pay stubs and tax returns), a credit history report, bank statements, and information on any outstanding debts. This documentation helps lenders assess your financial stability and loan repayment ability.
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Once your application is submitted, the process generally follows these steps:
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Underwriting: your financial information is verified and evaluated
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Appraisal: the value of the home you're purchasing is assessed
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Closing: you sign the loan documents and officially take ownership of the property.
How credit scores impact your mortgage
Your credit score influences the terms of your mortgage and your ability to secure a loan. Lenders use credit scores to assess the risk of lending money to you. A higher credit score typically means lower interest rates, better loan terms, and a smoother approval process. In comparison, a lower score can lead to higher interest rates or even loan denial. A strong credit score, in the 700 range and higher, can save you thousands of dollars over the life of your mortgage by qualifying you for the best available rates.
Improving your credit score before applying for a mortgage is a strategic move that can enhance your borrowing power. Start by checking your credit report for inaccuracies and dispute errors that could drag down your score. Paying down high balances on credit cards lowers your credit utilization ratio, a key factor in credit score calculations. Avoid opening new lines of credit or making large purchases in the months leading up to your mortgage application, as these actions negatively impact your score. Consistently paying your bills on time is also crucial, as payment history is the most significant factor in determining your credit score.
Down payments and PMI
The down payment requirement varies depending on the type of loan and the lender's policies. A down payment of 20% of the home's purchase price is often recommended for conventional loans, as it helps you avoid private mortgage insurance (PMI). However, many lenders offer lower down payment options, with some as low as 3% for qualified buyers. While a smaller down payment allows you to buy a home sooner, it does increase the loan amount and, therefore, the overall cost of the mortgage.
Private mortgage insurance (PMI) is an additional cost that comes into play if your down payment is less than 20%. PMI protects the lender if you default on your loan, and it's usually added to your monthly mortgage payment. While PMI enables many buyers to enter the housing market without needing to save a large down payment, it's an extra expense that can add up over time. The good news is that once your home equity reaches 20%, you can request to have PMI removed, lowering your monthly payments.
The final step
Closing costs are the last hurdle before you can officially call your new Spokane home your own. Closing costs are a collection of fees required to finalize the real estate transaction, and they typically range from 2% to 5% of the home's purchase price. Standard closing costs include:
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Appraisal fees: ensure the home's value matches the loan amount
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Title insurance: protects against any legal issues related to property ownership
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Loan origination fees: cover the lender's administrative costs.
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Other costs may include home inspection, recording fees, prepaid property taxes, and homeowners insurance.
While closing costs are unavoidable when buying a home, there are ways to negotiate and reduce these expenses. One strategy is to ask the seller to cover a portion of the closing costs, especially in a buyer's market or if the property has been on the market for a while. Another approach is to compare loan estimates from different lenders, as some may offer lower fees or no-cost closing options in exchange for a slightly higher interest rate. Review the closing disclosure statement to ensure all charges are accurate and fair, allowing you to challenge any unexpected fees before signing on the dotted line.
Finding your team
When choosing a lender, research those at local banks, credit unions, and online mortgage companies. Compare interest rates, loan terms, and customer reviews to identify lenders offering the best affordability and service. It's also beneficial to get pre-approval from multiple lenders to see which one offers the most favorable terms for your situation.
When choosing your real estate agent, Avenue • Stone Real Estate is the partner you need to ensure a seamless and successful experience. With a commitment to impeccable service, the team at Avenue • Stone goes above and beyond to achieve the best results for their clients. They understand that every detail matters and pay close attention to the aspects of the home-buying process that other agents might overlook. With their expertise and personalized approach, you can trust that your journey to homeownership will be in the best hands.
