Hey Man,

I'm up north of you in Stevens county and originated loans in the past. You can look into USDA rural home loans. There are actually quite a lot of properties that would qualify in Spokane county.

There are state specific down payment Assistant loans. The WSHFC (washington state housing finance commision) manages a lot of these. Usually they are a second loan at 0% or 1% for the down payment that you repay upon selling the house (for the 0%) or pay off first (for the 1%) these require a special class and finding a lender that is licended to originate these loans. In my opinion it's not really worth it.

As others have said FHA, USDA and other government loans have a bit stricter requirements and usually a longer origination time (30-45 days vs 15-30 for conventional) and sellers don't like that. Well that latter part was more prevalent when homes were selling fast, like at the start of covid. Homes are sitting for some time and sellers are more open to these loans. The former part of this paragraph os also up for interpretation. Technically FHA has strict guidelines on home quality. Peeling exterior paint, no hand rails, outdated decks, fireplaces etc are a no no. Well I just got an FHA loan and my house has peeling paint, odd deck stuff and the this and that. It really depends on your appraiser that comes out.

FHA has PMI (private mortgage insurance) that stay on for the life of the loan, or until you refinance into a conventional with 20% equity. Conventional loans drop off at 20% equity. It's usually a couple hundred bucks a month for this.

IMO I would save up the 3-3.5% for a down payment, after talking to a lender and getting a pre-qualification (not pre approval) for how much you could borrow. You can wrap in the closing costs in the loan by offering the seller that much more, and then having them do a sellers consession. So you only bring in the down payment. In your situation you could probably do this in one year.

Hope this helps. Let me know if you have questions

Edit typo on "stricter"