Looking to refinance or purchase a home in Washington State this year? What is the jumbo loan limit in Seattle? How might it affect your loan?
Seattle isn’t known for cheap housing. That means many home buyers and homeowners can find they hit a ceiling with many mortgage lenders. They may need a jumbo loan. How could this impact you, and your borrowing?
Big Home Prices, Big Loans
Despite a slowdown in activity during coronavirus restrictions, the Seattle Times reports that local home prices have just kept on going up.
There may be fewer listings and fewer closings, but house prices have kept rising. Buyers are still drawn to the Emerald City. Many are seeking to get money out of the stock market and bank accounts, and into the safety of real estate. Others are just wanting to upgrade to a bigger place, so that if they have to endure a new and longer lockdown, working from home and with kids homeschooling or even having to quarantine a family member with their own suite, they can, and keep their sanity. Some are moving from condos to single family homes, or from the city to more suburban and rural areas, and small towns where they can enjoy more freedom and self-sufficiency.
As a result, the median home price in Seattle rose 8.1% year over year by April 2020, to $815,000. That’s an average wealth gain of over $60,000 for local homeowners in just 12 months.
Even Seattle’s cheaper neighborhoods can easily run you over $400,0000 for an average home. That’s significantly more than the average you’ll find in much of America.
Even with these prices, today’s low interest rates and highly litigious and highly taxed society means it just makes sense to keep a mortgage on your property. Even when you could pay all cash or keep it paid off.
In many cases it is still far better to buy and own a home than to waste your earnings or savings on Seattle’s high rents.
The question is, how does this all influence which mortgage you can get, the right loan for you, and how to get the best home loan deals.
Conventional Vs. Jumbo Mortgage Loans
The regular old fashioned, staple American mortgage loan is the conventional loan. This is the traditional bread and butter home loan. Then there are government backed mortgage loan programs, like USDA and FHA loans.
In order to qualify for these loans, your loan amount has to conform. These maximum loan limits change every year with inflation and other political factors. As of 2020, the maximum conforming loan, of conforming loan limit was raised again. The FHFA lifted it to $510,400.
There are also special provisions for those who buy and own homes in higher cost areas. Seattle is one of those. You can now borrow up to $741,750 on a single family home, townhome or condo, and still have access to all of these programs. These are the loans with features like 100% financing, and no down payments, as well as good interest rates.
Another fantastic exception is a new change to VA home loans. They have removed the loan limits, enabling veterans to purchase great homes, with all the benefits that come with these loans.
Otherwise, if you need to borrow more than this is, you’ll be in jumbo mortgage territory. This is a larger type of loan. They also typically have different underwriting and qualifying rules and loan terms than conforming loan amounts.
What Is The Jumbo Loan Limit In Seattle?
While jumbo mortgages start at around $740,000, there is really no upper limit. Lenders often advertise residential lumbo loans up to $2M, or even $5M. You can even get loans of tens of millions of dollars.
When you start reaching into these types of numbers your mortgage broker may be sourcing these funds directly through capital markets on Wall Street.
While many jumbo mortgage borrowers are sophisticated and wealthy, lending such large sums to any individual can be seen as a greater risk by lenders. It certainly comes with more responsibility for them to be sure they are making a good loan with their investors’ money.
What Is Different About A Jumbo Mortgage Loan?
Trends are constantly changing with the markets and the data that is coming back in on loan performance.
Jumbo mortgages are sometimes seen as harder to get, but that’s not always the case. Some Seattle mortgage lenders prefer lending larger sums to these strong borrowers on good assets.
However, you may encounter some of these differences as well:
- Evaluation of payment shock if you have never borrowed this much before
- Larger down payment requirements
- Second appraisals to confirm the value
- Requests for tax returns or additional bank statements to verify income
- Exceptions & Creative Financing
Jumbo mortgage borrowers can have more complicated finances. Many may not feel they fit into a traditional bank underwriting mold. Yet, you can still get an awesome home loan.
Your Seattle mortgage broker can help you assess how to obtain certain exceptions. This is where ‘compensating factors’ can be applied. For example, you have hard to prove income, or write off most of it on your taxes, but have more assets than are usually expected from a borrower.
Some of these factors include:
- Alternative income verification
- A history of managing large loans well
- Extensive history on the same job or in the same line of work
- High credit scores
- Larger down payments
Creative deal structuring can also help optimize your loan, the smoothness of the process and getting the best rates and terms.
For example, splitting up your loan with an 80% first mortgage, and 10% second mortgage. This would allow you to put down only a 10% down payment, and earn you a much better deal on the bulk of your loan.
It’s important to know the jumbo loan limits, which move you up into a different type of loan. On the high side there really is no ceiling. Understand the differences, and work with your Seattle mortgage broker to structure a great loan you are going to love.