Twelve years ago, I purchased a beautiful lakefront condo in Seattle. However, my first home purchase turned out to be a real roller coaster ride, full of ups and downs. The developer went bankrupt, leaving the project unfinished, and the bank that financed the project was taken over by the FDIC. These turned out to be just the beginning of a series of unfortunate circumstances that — at one point — reduced me to tears.
Today, I'm about to cash out on that investment and refinance at historically low rates.

The truth is that real estate in Washington state is one of the best investments you can make and may actually save you money in rent over time. According to the state's Office of Financial Management, the medium home price in 2020 was $452,400, an 80.7% increase over 2009 values. A median-priced home during the third quarter of 2020 in Washington sold 18.5% higher than a year earlier, according to an analysis from the Center for Real Estate Research at the University of Washington.

Building equity, generating wealth
A real estate transaction is one of the biggest decisions a household can make — fraught with potential complications — but also a common and proven strategy to build wealth.

Danny Perez, a real estate broker at Coldwell Banker Bain, moved to Seattle from Dallas, Texas, in 2016 with his husband. He has helped many same-sex couples buy their first home. He says that buying a home is the best way to begin investing money in something that will gain value over time.

"Renters are basically paying their landlord's mortgage for them, and the landlord is the one that is building equity in the property that the renter occupies. If someone is in a position to buy a home and live there for at least a few years, they can slowly begin to build equity in the home," explained Perez.

"Usually, the longer they stay, the more likely they are going to increase the amount of money they will get, if and when they do decide to sell. Renting tends to be better for someone who needs to remain relatively mobile, especially if they are in a career that may require them to relocate often."

Jeanne Sickel, a mortgage loan originator at Homebridge Financial Services in Seattle, agrees. She has been helping same-sex couples finance homes for over 10 years. "I absolutely love it when I can help a Gay couple buy their first home, because I know it will provide stability for a long time," said Sickel. "I might be biased, but I think buying a home is the best thing you can do... People don't really do the math, but if you pay $2,200 in rent a month, in three years, you're out $79,200. You can buy a house with as little as 3% down, and then you can stop time — meaning your payment pretty much stays the same going forward. Your house increases in value, and you usually get paid more over time. So, living in your home becomes more affordable."

In addition to cost savings, real estate can be a stepping stone to growing your net worth. Sickel shared her own experience buying her first home with her wife and how they turned it into an investment property, generating wealth for her family.

"We bought our first home in 2010, and now we rent it and cash flows. We used the equity growth to buy our second home, and now that has gained equity too," she said. "If I continued to rent, I'd be paying the same as I do in my mortgage payment, not have a tax write-off, be subject to further rent increases, and, most importantly, wouldn't have gained hundreds of thousands in equity."

Financing a home
Unfortunately, housing affordability in Washington is falling as home prices continue to rise. The Center for Real Estate Research found that housing affordability fell for all buyers, including for first-time buyers, during the first quarter of 2021 over the previous quarter. The least affordable county is San Juan County, while Lincoln County is the most affordable. Thirty-two counties, especially in the central Puget Sound area, present affordability issues for newcomers.

Nonetheless, Sickel warned not to be disillusioned by the statistics.

"I love seeing first-time home buyers or people who didn't think they could buy a home buy a home. I look at this as a foothold to their financial future," she said. "This year, I helped a family get into their first home with 5% down. It was really tough in this competitive market, but we did it. They never thought they could do this. I know it will change their young daughter's life. Her parents created stability and an investment that they
can use as she gets older if they need to."
The Washington State Housing Finance Commission (WSHFC) offers assistance for first-time home buyers who earn up to $160,000 a year. Many local municipalities also have their own programs. The City of Seattle's Office of Housing provides down-payment assistance, up to a maximum of $55,000, for households at or below 80% of area median income making open-market purchases.

"Down-payment assistance is our most powerful tool for helping home buyers. Many people can afford a mortgage payment but don't have a lot of savings or family to provide that kind of gift. Our down-payment assistance can bridge that gap," said Lisa DeBrock, director of homeownership at the WSHFC. "Homeownership is increasingly out of reach for families in Washington as home prices keep going up. But it is still possible for those with moderate incomes to buy a home with a little help."

DeBrock suggests working with a loan officer familiar with their programs and taking one of their free home buyer education classes. More information can be found at www.heretohome.org.

Being ready in a competitive housing market
Affordability is only one obstacle facing homebuyers in Washington state. Although the rate of sales has yet to eclipse the 2003 high, the seasonally adjusted annual rate of existing home sales rose 7.1% when compared to the first quarter of 2020. Perez described the real estate market in Seattle as "unbelievably fast-moving and competitive."

According to the state Office of Financial Management, the state's population grew steadily in 2021, with most of the growth concentrated in larger cities. Despite a drop in migration due to COVID-19, new households moving to Washington continue to be the primary driver behind the growth. Therefore, the market is expected to remain hot for some time to come.

One common mistake new homebuyers make is to approach the market without a real estate agent, he said. "So many buyers today are very-self reliant, and they usually do lots of research on their own. Online tech resources are great tools, but a buyer or seller is making the wisest decision when they work with an agent," he said.

"By getting help from an agent, a buyer can potentially keep from offering too much for a property. We can point out any red flags. We can help home sellers to potentially see a higher net from the sale, if they take the advice of an agent on how to best prepare and market the property. Ultimately, a real estate agent is the best possible advocate and advisor a buyer or seller can have.

"First-time home buyers may not know that it costs them nothing to enlist the help of an agent, since the agent commission is paid by the seller of a property."

Perez also advises new clients to first pull their credit reports from all the major credit bureaus and make sure the information is accurate. Your credit score will be used to determine the mortgage rate, and negative items on your report could cost you a lot of money over the term of your loan. He says to gather bank statements and previous year's tax returns.

"The first and biggest piece of advice to first-time home buyers is to get their finances in order," he said. "Ask themselves if they have an adequate down payment. If they plan on getting their down payment as a gift from a family member or if it is tied up in an investment account of some sort, they need to get the process of getting that money into their account.

"All of this is to prepare for that meeting with the mortgage broker... In the current housing market, sellers will expect a buyer to be preapproved, otherwise their offer may not even get a second look.

"If they need help finding a mortgage broker, reach out to friends, family, or a real estate agent for a good referral."

Sickel added that the "market has been exceptionally competitive over the last several years" and "moves fast." She believes buyers "need to make a plan on how to make [their] offer more competitive than the next guy."

"This is where a good realtor and lender team can play a critical role," she said.

Financing real estate
Sickel says there are several considerations when choosing a lender, but first and foremost, you want a mortgage company with a "good reputation" for closing loans. "If you have a good realtor, they will recommend a good lender, because their sale depends on the lender," she said. "Then, I'd talk to a few and go with the person who [you] feel the most comfortable with. If you follow the rate, you could be disappointed.

"Remember, the lender is the person who takes you from signing the contract to closing your loan on time. Think of it like a relay race: you want your last runner to be amazing."

Perez says "big box" banks may not work well for many first-time home buyers because they "will probably not give them the personalized attention and service they will likely need."

"Big bank mortgages are usually handled by several different departments all working on the same loan," he said. "It can sometimes be difficult to find the 'one person' who has a complete grasp on what's going on with their file. The same thing goes for online-only mortgage companies.

"Smaller lending institutions tend to have one point of contact for a customer loan and usually can get the process done with fewer or no hiccups along the way."

Sickel recommends using a local mortgage lender to help streamline the process. "A lot of people try to use credit unions or out-of-area banks, and they just don't have the same platform that a real mortgage bank has. In this market, you have to move fast and efficiently, and a 'first come first serve' mentality doesn't work," she said.

If you're looking to refinance your home, lower your rate, or cash out your equity to pay down debt, now is the time to meet with a lender, says Sickel. "It's a great time to refinance — partly because rates are so low, but we're seeing a lot of appraisal waivers. We can remove mortgage insurance and get a better rate," she said. "Not having to do an appraisal is a big lift.

"As far as [those] struggling to pay the mortgage, there are several government agencies or nonprofits around the Seattle area that have programs to help, but talking to a mortgage lender should be the first step to finding out [your] options."

The values of your lender may be important to some, said Sickel. She encouraged borrowers to ask those questions if that is a concern for them. "The company I work for, Homebridge, has a diversity-and-inclusion advisory board, and one of the topics that came up was how to get loans to marginalized communities," she said. "They recognized that to make loans to BIPOC and LQBTQ+ communities, you have to hire loan officers from these communities, because loan officers do loans for people in their communities and for people they know."

Other considerations
When calculating a monthly payment you can afford, Sickel says not to forget to include the annual property tax assessment and to remember that your tax liability can change each year. She says buyers from California often make this mistake.

Unmarried same-sex couples should consider how to hold the title on their property, suggested Sickel. "I bought my first house with my partner — we're now married — and we chose a 50/50 approach and held it as 'tenants in common.' When we bought our second house, we were married, so we held the title as 'a married couple.'"

Sickel offered one last consideration when financing real estate. "When you go to get a loan, the lender gets to know a lot about you, so, make sure you're comfortable with that lender."

Getting help
It's not easy asking for help when you are underwater on your mortgage or are facing foreclosure. However, there are resources available.

� The Washington Homeownership Resource Center is a great place to start. It seeks to educate current and future homeowners. Its website offers links and information on a wide variety of topics. Visit www.homeownership-wa.org.
� The Washington State Department of Commerce offers free housing counselors and a Foreclosure Fairness Program, which includes civil legal aid and foreclosure mediation. Call 1-877-894-HOME (4663) for more information.
� The Washington State Office of the Attorney General has information about protections for homeowners in the face of the COVID-19 pandemic. You can learn more about the CARES Act, which provides protections for homeowners with federally backed loans, and the foreclosure moratorium www.atg.wa.gov/foreclosure-and-mortgage-assistance.
� The Washington State Department of Financial Institutions has also launched a hotline for homeowners in distress at 1-877-RING-DFI (746-4334). They can help to contact your mortgage servicer and to discuss your options.