Affordable Living in Tacoma: Mortgage Programs for First-Time Buyers

Published:
August 16, 2024
Last updated:
August 16, 2024
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Tacoma, Washington is one of the most affordable housing markets in the broader Seattle metropolitan area. And in this guide, we’ll explain how a first time home buyer in Tacoma, WA could make it even more affordable by choosing the right mortgage program.

Tacoma: A More Affordable Alternative to Seattle

Affordable living in Seattle, WA may be possible, as long as you consider looking just outside the city limits. Tacoma, Washington is a city located along the Puget Sound about 33 miles south of Seattle. It serves as the county seat of Pierce County and is also the second-largest city in the Puget Sound region (after Seattle).

Tacoma offers stunning natural beauty, including the iconic Mount Rainier, which forms a backdrop for the city. Once primarily an industrial hub, the city has undergone a significant transformation in recent years and now has a thriving downtown area.

Despite all of these perks, Tacoma home prices remain relatively low by regional standards. In fact, the median price in Tacoma is more than 40% lower than the median for the city of Seattle.

For the sake of comparison, here are the median home prices as of summer 2024:

  • Auburn: $605,203
  • Bellevue: $1,453,883
  • Kent: $643,863
  • Redmond: $1,375,490
  • Seattle: $869,584
  • Tacoma: $491,417

These median prices will likely change by the time you read this article. But they’ll still highlight affordable housing in Tacoma relative to other major cities in the Seattle metro area.

Mortgage Options for First-Time Buyers

Home prices in Tacoma have increased a lot over the past decade. From 2016 to 2024, for example, the median home value in the city rose from $224,000 to $490,000.

But it’s still a more affordable housing market when compared to most other major cities in the Seattle metro area. A lot more affordable, in some instances. That’s why so many first-time buyers ultimately settle on Tacoma as their landing pad.

It gets better. By choosing the right mortgage program, you could reduce your housing costs and down payment amount even more.

Here are some loan options and home buying tips in Tacoma when buying your first home:

1. Choose a low down payment mortgage in Tacoma.

Surveys have shown that first-time home buyers have a lot of misconceptions regarding down payments. For instance, a lot of them believe they have to put down at least 20% when buying a house.

The truth is, a first time home buyer in Tacoma, WA can purchase a home in the city with a down payment in the 3% range. FHA loans allow for an upfront investment as low as 3.5% of the purchase price. And some conventional loans offer a down payment as low as 3%.

For a median-priced home in Tacoma, Washington, a down payment of 3% would come out to around $14,740. A typical first-time buyer could reach that savings goal within a few years, or even sooner if they apply gift money toward the down payment.

Of course, a bigger down payment has its advantages as well. If you put 20% when buying your first home in Tacoma, you could avoid having to pay mortgage insurance. You’ll also end up with smaller monthly payments and less interest paid over the long term.

Just know that a down payment of that size is rarely necessary in Tacoma.

2. Consider both fixed and adjustable-rate mortgages.

The standard 30-year fixed-rate mortgage is the most popular loan product among first-time home buyers in Tacoma and elsewhere in Washington. It makes homeownership more affordable by spreading the monthly payments out over a long period of time.

But in some cases, an adjustable-rate mortgage (ARM) loan might be the better option.

A typical ARM loan has an interest rate that stays the same for the first few years, and then adjusts once per year after that. They usually offer lower mortgage rates during the initial fixed phase, compared to the more popular 30-year fixed mortgage.

First-time buyers in Tacoma who only plan to stay in a home for five to seven years could reduce their housing costs during those years. And if they sell or refinance the home prior to the first adjustment, they remove any potential downside.

3. Use a down payment gift to clear the upfront hurdle.

Down payment gifts can also reduce some of the upfront hurdles associated with a home purchase. Even in a fairly affordable housing market like Tacoma, first-time buyers often struggle to come up with the funds needed for a down payment.

A down payment gift can remove this obstacle.

A down payment gift is exactly what it sounds like. It’s when a family member or other approved donor gives you money to put toward your down payment or closing costs.

All the major mortgage loan programs allow gifts to be used. That includes FHA, VA and conventional financing. But the money being gifted must truly be a gift, and not a short-term loan. The donor must sign a letter to this effect.

4. Use a VA loan in Tacoma if you’re a military member or veteran.

With Joint Base Lewis-McChord located nearby, a lot of military members live in or around Tacoma. The city is home to many veterans as well. For both of these groups, the VA loan program can make homeownership more affordable.

Unlike FHA and conventional mortgage products, VA-guaranteed home loans allow borrowers to finance the entire purchase price. That means you don’t have to make a down payment unless you want to.

VA loans don’t require mortgage insurance either, reducing the borrower’s housing costs even more. There’s really no other loan product that offers this combination of benefits for Tacoma home buyers.

Finding Affordability in the Seattle Area

The financing strategies listed above only scratch the surface. You could fill an entire book with the different ways to save money and improve affordability when buying a home.

But there are two important points to take away from this guide:

  1. The city of Tacoma is a lot more affordable for first-time home buyers than most other cities in the Seattle metro area.
  2. Using the right mortgage strategy can make homeownership even more affordable, while easing the down payment burden.

Have Questions About Tacoma Mortgage Programs?

If you’re a first time home buyer in Tacoma, WA, we can help. Sammamish Mortgage has been helping clients in the Pacific Northwest for nearly three decades. We offer a variety of mortgage programs for first-time buyers in Tacoma, WA, including everything mentioned in this guide. Get an instant rate quote today and contact us if you need a loan or have questions.

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