Every local real estate market is different, so this post simply shares some of our experience and lessons learned from buying a home in Seattle.

The Five Key Factors in Buying a Home in the US

Based on my experience, the essential factors in buying a home are:

  • Down payment: Generally speaking, the minimum is 20% of the home price, with no upper limit. If you are able to pay all cash, that gives you a certain advantage in a bidding war.
  • Credit history / pre-approval letter / mortgage (you can skip this if you are paying all cash)
    • Back in 2015, getting a pre-approval was very easy. You could just provide an approximate credit score, job information, and annual salary, and get approved. But starting in 2016, that was no longer enough. You had to provide all the documents that would be required for a formal mortgage application before getting approved. Of course, this depends on how quickly you organize and submit your paperwork. In general, once the broker receives your documents, they can issue a pre-approval letter the same day or the next day.
    • Unless you are buying with cash, you can only submit an offer after getting this pre-approval letter. Because of that, your agent will also take you more seriously as a genuine buyer and be more willing to spend time showing you homes.
    • Whether it is a pre-approval letter or the actual mortgage, your credit history is very important, including your credit score and Hard pull (HP). In general, if your score is above 680, you usually do not need to worry about qualifying for a loan; if it is above 740, you can generally get the best interest rate your credit profile can support. If you have had a lot of recent HPs, the bank or broker may ask you to explain the reason for each one. So if you are getting close to buying a home, do not apply for credit cards too frequently. Not only can that lower your credit score, it can also make lenders feel that your finances may be unstable and that you need to keep opening new credit lines, which can be a hassle to explain.
    • You only start applying for the mortgage after your offer on a home is accepted. What you need before buying is a pre-approval letter. You get this through a bank or a mortgage broker. It shows that they have already done a preliminary review of your finances and indicates how much they are willing to lend, along with the property type and the maximum percentage of the total purchase price they will finance. For example: a $500,000 loan for the purchase of a single-family home, not to exceed 70% of the total home price.
  • Buyer's agent
    • In theory, a buyer's agent fully represents your interests, and the commission is paid by the seller, so finding a trustworthy buyer's agent is all upside.
    • In the Seattle market, not having a buyer's agent is very inconvenient. Seattle is a seller's market, and listing agents are highly sought after, so many listing agents are unwilling to, and do not need to, act as a dual agent. Without an agent, you basically cannot submit an offer (there may be ways, but I do not know them).
    • If you only need an agent to show you homes, I recommend a Redfin agent. Scheduling is very convenient, it saves a lot of time when touring homes, and they generally will not keep bothering you afterward.
  • Listing information
    • In the internet era, most of the listing information your agent can see is also available to you. Do not assume that once you have an agent, everything is taken care of. No matter how good the agent is, no one will care about your home purchase as much as you do.
    • Redfin.com is highly recommended and a must-use when buying a home. Redfin's data updates very quickly, is fairly comprehensive, and also provides its own estimate (not very accurate, but still a useful reference).
  • Attorney: In the Seattle market, this is optional, because the offer contracts are all prepared in advance and you mainly just fill in the blanks. Having an agent is enough.

Those are the basic factors. Next, I will go into more detail based on my own experience.

My Homebuying Experience in Seattle

Preparing the down payment

It is best to keep your down payment in your own account for at least 2 months. That makes the mortgage process easier. Back when we bought, we had deposited the money several months in advance, and during the mortgage process no one asked about the source of the funds at all. So I recommend preparing early before buying a home to avoid unnecessary trouble.

If your savings are spread across different accounts, you can consolidate the funds in the following ways:

  • Write yourself a check from another account and deposit it into the account you will ultimately use for payment (basically no risk, no fee, but there is usually a transfer limit)
  • Use ACH Transfer to push money or pull money between accounts (basically no risk, minimal fees, and usually some transfer limit)
  • Withdraw cash from one account and deposit it into the payment account (there is some risk, so I do not recommend making large cash deposits or withdrawals directly)

Choosing an agent

When it comes to finding a real estate agent, I still recommend finding a Chinese-speaking agent, since being on the same page about homebuying preferences is pretty important. Otherwise, you may have to spend a long time explaining yourself. At first, we went to open houses on our own and chatted with buyer's agents who were waiting there for clients, but the results were not very good. One reason was that agents who were relatively free and had no clients at the time were often newcomers to the industry and could not provide especially useful information. Another reason was that these interactions were brief, so there was not much trust on either side. After a few weeks of this, we decided it was better to first find a reliable buyer's agent.

We looked on a Seattle Chinese website. There were a lot of agents to choose from, and we more or less picked one based on instinct. We contacted one, had a phone call, and set up a home tour. Looking back, that was actually a small mistake. This agent was very experienced and very nice, but communication never felt especially smooth. We toured a few homes and even submitted offers, but later ended the relationship. After that, when we looked for another agent, we first spent some time talking on the phone, asking about their experience, how familiar they were with certain neighborhoods, and so on. You could call it an interview, or just a chance to get to know each other. After two or three calls, we decided to work with an agent around our age.

PS: We were relatively lazy. I know some people interview more than a dozen agents before deciding whom to work with.

PPS: The buyer's agent is paid by the seller. It is usually 3%, though sometimes 2.5%. In general, agents are often willing to rebate 1%-1.5% to the buyer, but you need to negotiate that with your agent from the very beginning.

Pre-approval and touring homes

Once you have chosen a buyer's agent, in theory you can start looking at homes. But to avoid wasting each other's time, I still recommend getting pre-approved first, because you cannot submit an offer until you have a pre-approval. You also should not tour homes blindly. You need to factor in area, price range, property type, and so on. At first, we decided to look only in several cities around our workplace, but after submitting several offers and getting shocked by how much over asking people were bidding, we expanded our search area significantly. Once you decide on acceptable locations, price range, and home type (mainly number of bedrooms and bathrooms; very few people care much about orientation), you can have your agent help you search, but I recommend searching online yourself as well. Listing information is public. Redfin, Zillow, and the MLS used by agents are the most common websites. Redfin is my top recommendation because its information updates very quickly, while Zillow often lags behind.

Homes in Seattle sell extremely quickly. A good home can even be snapped up within 1 day after aggressive bidding. A fairly good home usually sells within a week, and even an average home can sell in about 2-3 weeks. In other words, unless a house is so bad that it has absolutely no redeeming qualities, it is basically impossible for it not to sell in Seattle. So my advice is: before you actually get a home, do not fall in love with any particular house, because the competition is incredibly intense. The point here is that if you see a home you like, contact your agent and go see it right away. Do not wait. If you wait, it may be gone. I have a friend who bought in the Bay Area: when the developer notified them that units were available, they went immediately and got one. People who came back after eating dinner got nothing.

Submitting an offer

Once you’ve picked a house and are ready to submit an offer, you can work with your agent to decide on a price. In Seattle, you generally have to bid over asking, so the key is really agreeing on your maximum price. In other words, you can submit an offer at the seller’s listing price, along with an escalation form stating how much you’re willing to increase your bid if there are competing offers, how much each increase should be, and what your ceiling is. Your agent will then prepare the contract, and you can sign it electronically. The contracts are standardized, so in most cases you don’t need to worry too much about the legal language. What you do need to pay attention to is which contingencies you want to waive.

A financial contingency is almost never waived unless it’s a cash offer. This protects you by allowing you to back out and recover your earnest money if your financing falls through. Another related contingency is the appraisal contingency. If your bid goes above the bank’s appraised value, this determines whether you can cover the gap yourself. This contingency is often waived; otherwise, your higher bid does not mean much. There is also the inspection contingency, which is also commonly waived in a competitive seller’s market. That is why it helps a lot if your agent knows something about a home’s structure and condition. Otherwise, you can choose to do a pre-inspection. Think of this as an investment, because even if you pay for a pre-inspection, there is no guarantee you’ll win the house. In fact, it may signal useful information to other buyers: “Look, someone did a pre-inspection and still decided to submit an offer, so the house probably doesn’t have any major problems.” There is also the seller disclosure. Most people do not call this out specifically, but some agents treat it as a selling point and will separately mention that they waived this as well. Back then, we waived basically everything we could—but in the end, we still won the house because we made the highest offer.

Getting Your Mortgage Ready

After your offer is accepted, the next step is the mortgage. You do not have to work with the bank or broker that gave you your pre-approval letter. You can ask several banks or brokers about their rates and fees at the same time, and then lock your rate. There are several types of mortgage rates, but the most common are fixed-rate and adjustable-rate mortgages. If rates are relatively low at the time and you plan to stay in the home for a long time, a fixed rate may make more sense. Otherwise, you can consider an adjustable rate. I won’t go into detail here, but you can do your own research online or ask a broker for a more thorough explanation.

One thing worth emphasizing here is your credit history. Your credit history, down payment, and annual income determine whether you can qualify for a mortgage and what interest rate you can get. Different banks and lenders use slightly different credit score tiers, but moving down just one tier will usually increase your rate by at least 0.25%. If your score is below 650 (or 620 at some lenders), you may need to raise your down payment to at least 40% in order to qualify, and your interest rate will almost certainly be less attractive than other borrowers’. On the other hand, if your score is above 700 (or 720–740 at some lenders), then you can generally qualify for the best rate available based on your credit profile. Banks and brokers can also be quite sensitive to hard pulls on your credit report. At the time, our broker asked us to explain the reason behind every hard pull. So before applying for a mortgage, try to avoid having a large number of hard pulls within a short period of time.

Some people may not know much about their own credit score or credit report. I’d suggest reading the articles below first. Try to get your credit score as high as possible before finalizing your mortgage so you can reduce your interest rate:

If your credit history is not very strong, it is usually best to work with a broker. A broker works with many lenders, and different institutions focus on different strengths and weaknesses. Based on your credit profile, a broker can help you find the lender that gives you the best odds of approval and the best available terms. You should also be as honest as possible when speaking with a broker. They will not judge you—or at least not openly. On the contrary, they want the deal to go through so they can earn their commission. For example, we explained why our credit score had suddenly dropped at the time (mostly due to our own carelessness, not because of any serious underlying issue), and he asked us to provide a written explanation to submit with the application package. I don’t know whether it made a difference, but in the end, our mortgage was approved.

Home Inspection and Closing

If you did not waive the inspection contingency, you can still choose to have the home inspected within the specified timeframe. You can hire an inspector yourself, or ask your agent to recommend one. If the inspection uncovers serious problems, you can either walk away from the contract or negotiate the price with the seller.

Once the mortgage is finalized and the inspection does not reveal any issues, you can schedule a final walk-through with your agent to make sure the home has not suffered any major damage during the past few weeks. After that, you can pay the remaining funds due and sign with the third party handling the closing.

Once you get the keys, the long and exhausting home-buying journey is finally over—and you can start enjoying your new life.

Summary

Buying a home is a major life event no matter what country you are in. If you are planning to buy a house, it is best to start preparing and learning about the process as early as possible. Because of space limitations, this article can only give a fairly broad overview of the key factors in buying a home and the basic steps involved. If there is a specific part of the process that you would like to learn more about, feel free to leave a comment and ask. We will do our best to answer within our ability.