Know Your Loan Options
Before You Fall in Love
with a Home.
Understanding the difference between loan types and knowing what assistance programs exist can save you thousands and open doors you did not know were available. This is what I walk every buyer through before the search begins.
Your Loan Type Shapes What You Can Buy and Where.
Most buyers come to their first conversation with me having one loan type vaguely in mind, usually conventional, without knowing whether it is the right fit for their situation. The loan type you choose affects your down payment requirement, your monthly payment, your insurance costs, and in some cases which properties are even eligible. Getting this decision right before you start your search changes everything that follows.
In the Gig Harbor market specifically, loan type matters more than buyers often expect. Some Peninsula properties on septic systems, private wells, or with acreage can limit which loan programs apply. VA and USDA loans have property eligibility requirements that are worth understanding before you fall in love with a home that does not qualify. Knowing this upfront keeps you from wasting time and losing deals.
Washington State also has some of the best buyer assistance programs in the country, and they are dramatically underused simply because buyers do not know they exist. First-time buyers in particular can access down payment grants, low-interest second mortgages, and tax credit programs that meaningfully change the math on homeownership. I walk every eligible buyer through these options before we talk about search.
I am not a lender and this is not financial advice. What I am is someone who has helped buyers navigate these decisions for 17 years and knows which local lenders to refer you to for each program.
The Four Main Mortgage Programs for Gig Harbor Buyers
Each loan program has different eligibility rules, down payment requirements, and tradeoffs. Here is a plain-language breakdown of each one so you can walk into a lender conversation already knowing which direction you are headed.
Conventional loans are not backed by the federal government. They are originated by private lenders and sold to Fannie Mae or Freddie Mac on the secondary market. This makes them the most flexible loan type in terms of property types and loan amounts, but they also carry stricter credit and income requirements than government-backed programs.
- No upfront mortgage insurance premium
- PMI cancels automatically at 20% equity
- Works on a wider range of property types
- Lower total cost over time for buyers with strong credit
- Jumbo options available above conforming limits
PMI is required when your down payment is under 20% and adds to your monthly payment. Credit score heavily influences your interest rate, so buyers with scores under 680 may find FHA more cost-effective.
FHA loans are insured by the federal government, which allows lenders to offer them to buyers with lower credit scores and smaller down payments than conventional loans require. They are one of the most popular programs for first-time buyers and buyers who had a credit event in the past few years.
- More flexible credit score requirements
- Only 3.5% down with 580+ credit score
- Down payment can come entirely from gifts
- More forgiving of past credit issues
FHA loans require both an upfront mortgage insurance premium (1.75% of the loan) and an annual MIP that stays for the life of the loan if you put down less than 10%. This adds meaningful cost over time compared to conventional. The lower loan limit can also be a challenge in Gig Harbor's market.
The VA home loan benefit is one of the most powerful financial tools available to those who have earned it. Backed by the Department of Veterans Affairs, VA loans require no down payment, no private mortgage insurance, and typically carry competitive interest rates. There is no loan limit for eligible buyers who have full entitlement.
- No down payment required
- No private mortgage insurance
- Competitive rates typically below conventional
- No prepayment penalty
- Reusable benefit, can be used multiple times
VA loans require a funding fee (1.25% to 3.3% of the loan, varies by use and down payment) unless you have a service-connected disability. Properties must meet VA Minimum Property Requirements, which can occasionally rule out homes needing significant repairs.
USDA loans are backed by the U.S. Department of Agriculture and designed to support homeownership in eligible rural and suburban areas. They require no down payment and carry competitive rates, but both the buyer and the property must meet eligibility requirements. Importantly, parts of the Gig Harbor Peninsula including some Key Peninsula areas may qualify.
- No down payment required
- Below-market interest rates
- Lower mortgage insurance costs than FHA
- Eligible in more Gig Harbor-area communities than most buyers expect
Both the property and the buyer must qualify. Income limits apply at 115% of area median income. Properties must be in USDA-designated eligible areas, which you can check at the USDA eligibility site. This rules out most of downtown Gig Harbor but some Key Peninsula and rural Pierce County areas do qualify.
Programs Most Buyers Do Not Know Exist
Washington State has some of the most robust buyer assistance programs in the country, administered primarily through the Washington State Housing Finance Commission. Many eligible buyers leave significant money on the table simply because no one told them these programs exist. Here is what is available right now.
Washington's flagship homebuyer program. Provides a below-market interest rate on a 30-year fixed mortgage paired with a second mortgage for down payment and closing cost assistance. One of the most widely used programs in the state.
- Assistance amount: Up to 4% of the loan amount for down payment and closing costs
- Structure: 0% interest second mortgage, deferred for 30 years or until sale/refi
- Income limit: Varies by county, roughly $175,000 for Pierce County
- First-time buyer: Required (or not owned in past 3 years) for some configurations
- Loan types: Works with FHA, VA, USDA, and conventional
- Homebuyer education: Required before closing
A below-market first mortgage paired with down payment assistance, specifically targeting low to moderate income buyers. Designed for buyers who may not qualify for standard market rate financing without additional support.
- Assistance: Paired with down payment assistance second mortgage
- Income limits: Lower than Home Advantage, targeting moderate-income households
- First-time buyer: Required
- Purchase price limits: Apply based on county and property type
- Homebuyer education: Required
- Best for: Buyers whose income falls below the Home Advantage ceiling
The MCC is a federal tax credit, not a deduction, that allows eligible buyers to claim up to 20% of their annual mortgage interest as a direct credit against their federal income tax liability. On a $500,000 loan this can mean up to $2,000 back every year for the life of the loan.
- Credit amount: 20% of annual mortgage interest paid, up to $2,000 per year
- Duration: Applies for the life of the loan as long as home is primary residence
- Can be combined: Yes, with Home Advantage and other WSHFC programs
- Income and purchase price limits: Apply, vary by county and household size
- Why it matters: On a 30-year mortgage this can total $60,000 in tax savings
Washington State also administers targeted programs for specific buyer populations. These include HomeChoice for buyers with disabilities, and various county and city-level programs that can be layered on top of state assistance.
- HomeChoice: Up to $55,000 in down payment assistance for buyers or household members with disabilities
- Veterans DPA: Additional assistance available for veterans beyond VA loan benefits
- Pierce County programs: Pierce County Community Development offers targeted assistance for lower-income buyers
- Program stacking: Many of these programs can be combined with state programs for maximum benefit
- Availability: Funding is limited and programs open and close throughout the year
For most programs, you do not need to be a literal first-time buyer. If you have not owned a primary residence in the last 3 years, you likely qualify as a first-time buyer under these programs.
Most WSHFC programs require completion of an approved homebuyer education course before closing. These are typically available online for around $20 to $30 and take 4 to 8 hours.
All down payment assistance programs require the home to be your primary residence. Investment properties and vacation homes are not eligible.
Program details, funding availability, income limits, and purchase price limits change frequently. The information above reflects general program structures as of early 2026 and is provided for educational purposes only. For current eligibility and availability, visit the Washington State Housing Finance Commission at wshfc.org or contact a participating lender. I am happy to refer you to local lenders who specialize in these programs.
What Buyers Ask Me About Mortgages
Can I use down payment assistance with a VA loan?
Yes. Washington State Home Advantage assistance is compatible with VA loans. Since VA requires no down payment, the assistance typically gets applied toward closing costs, which can significantly reduce what you need to bring to closing.
Does using assistance programs hurt my offer in a competitive situation?
Not necessarily. Most assistance programs still result in fully financed, pre-approved offers. A well-prepared offer with a local lender pre-approval letter is competitive regardless of whether assistance programs are part of the picture. The key is choosing the right lender who knows how to structure and communicate these offers clearly.
Can I use USDA financing on the Gig Harbor Peninsula?
Parts of the Peninsula are eligible, particularly Key Peninsula communities and some rural outer areas of Pierce County. Most of central Gig Harbor and established subdivisions do not qualify. I always recommend checking the USDA eligibility map for a specific address before ruling it out.
What credit score do I actually need to buy in Gig Harbor?
You can technically qualify for FHA financing with a 580 score, but most lenders want to see 620 or above for conventional and 640 for the best rates. A score above 720 opens significantly better rate tiers and can lower your monthly payment more than you might expect. If your score needs work, a good lender can give you a specific action plan to improve it in 60 to 90 days.
How do I know if I qualify for first-time buyer programs?
The most common misconception is that you have to be a literal first-time buyer. Most Washington State programs define first-time buyer as someone who has not owned a primary residence in the last 3 years. Divorced buyers, buyers who sold a home during the pandemic, and buyers re-entering the market frequently qualify.
Should I get pre-approved before researching loan programs?
Do both at the same time. A good local lender will walk you through which programs you are eligible for during the pre-approval process and build those into your purchasing strategy. Coming in educated on what exists helps you ask the right questions and ensure your lender is not missing options that benefit you.
Know Your Numbers.
Then Find Your Home.
Understanding your loan options and what assistance you qualify for changes the math on buying a home in Gig Harbor. I have been helping buyers navigate this for 17 years and I am happy to walk you through where to start, which lenders to talk to, and what your budget actually looks like in today's market.
Or call / text Stacia directly: (253) 426-8785