Down Payment and the Moving Target

Types of down payment

If you talk to someone from the old school thought on buying a house, 20% is the way to go. That must be cool to have a literal gold mine in your back yard to get that down payment money. But there are many different down payment structures to get a house. Many programs offer anywhere from 3%, 3.5%, and 5% of the purchase price for a down payment.

Saving versus appreciation

Tacoma and the rest of the Puget Sound region is seeing large year over year appreciation. What was 300,000 in 2018 was 325,000 in 2019 and more for 2020. With locking your housing payment and home at the level of appreciation you will gain equity faster than you can save money to get to 20%. Consider a home appreciating at 8.33% as in this example. 20% down on 300,000 is 60,000 but for 325,000 is 65,000. If you are trying to reach a full 20% down, you will have to add another 5,000 in a year to the previous savings goal just to keep up.

Down payment assistance

If you have at least a 620 credit score and make under 145,000 a year, there are great programs for you in the State of Washington to help you bridge not having enough money for a down payment at a very low to no interest on your down payment. This program helped my wife and I buy a home when we didn’t have enough for a down payment. This allowed us to also to make build equity and see our home gain appreciation instead of chasing the moving target of a 20% down payment.