With Seattle's median home price near $850,000, a 5% down payment means roughly $42,500 upfront. That's about $17,000 more than 3% down, but it buys you lower monthly PMI and a smaller loan balance from day one. For buyers who have some savings but don't want to drain their reserves, 5% down often represents the practical middle ground.
How 5% Down Conventional Loans Work
Unlike the 3% down programs (HomeReady, Home Possible) that have income limits, standard 5% down conventional loans have no income cap. You just need:
- A credit score of 620 or higher (700+ preferred for competitive PMI rates)
- Debt-to-income ratio typically under 45%
- Stable employment and income documentation
- The loan amount must stay within King County's conforming limit of $1,063,750
Down Payment Comparison for Seattle Homes
| Home Price | 3% Down | 5% Down | Difference |
|---|---|---|---|
| $700,000 | $21,000 | $35,000 | +$14,000 |
| $850,000 | $25,500 | $42,500 | +$17,000 |
| $1,000,000 | $30,000 | $50,000 | +$20,000 |
PMI Savings at 5% Down
PMI rates drop as your loan-to-value ratio decreases. Moving from 97% LTV (3% down) to 95% LTV (5% down) typically saves 0.10-0.20% annually on PMI. On an $800,000 loan, that's $67-134 less per month.
Sample monthly PMI estimates at 5% down (95% LTV) on an $807,500 loan:
- 780+ credit score: ~0.28% annually (~$188/month)
- 720 credit score: ~0.58% annually (~$390/month)
- 680 credit score: ~0.95% annually (~$639/month)
Compare those to the 3% down PMI rates, and you'll often find the extra $17,000 down pays for itself within 2-3 years through lower monthly costs.
No Income Limits
A key advantage of 5% down conventional loans: there's no area median income cap. HomeReady and Home Possible (the 3% down programs) require income below 80% of AMI. Many Seattle tech workers, healthcare professionals, and dual-income households exceed that threshold.
At 5% down, your income can be as high as needed to qualify for the payment. The only limit is the loan amount staying within conforming limits.
Reaching 20% Equity Faster
Starting at 95% LTV instead of 97% LTV means you're closer to the 80% threshold where PMI can be removed. With Seattle home values appreciating 3-5% annually in typical years, a buyer who puts 5% down might hit 20% equity in 3-4 years through a combination of payments and appreciation.
Once you reach 80% LTV based on the original purchase price, you can request PMI cancellation. At 78% LTV, it must be automatically removed.
When 5% Down Works Best
- Your income exceeds the HomeReady/Home Possible limits
- You have enough saved but want to keep reserves for closing costs and move-in expenses
- Your credit score is in the 700-750 range where PMI savings at 5% are meaningful
- You're buying in the $800K-$1M range and want to stay comfortably within conforming limits
When to Consider a Different Path
- Income under 80% AMI? Look at 3% down with HomeReady or Home Possible for reduced PMI rates
- Credit below 680? FHA at 3.5% down may offer better overall terms
- Buying above $1.1M? You'll need a jumbo loan, which typically requires 10%+ down
Gift Funds and Assistance
Like other conventional loans, 5% down financing allows gift funds from family members for part or all of the down payment. Washington State programs like WSHFC Home Advantage can also be layered in for additional help with down payment or closing costs.
Get Your Numbers
Julie can run a comparison showing your actual monthly payment at 3%, 5%, and 10% down using current rates and your specific credit profile. Many buyers are surprised at how small the monthly difference is once PMI savings are factored in.
Call (206) 778-5825 or send a message to start with a pre-approval.