Do you need a jumbo sized mortgage loan to buy a home or refinance your house in Seattle. WA?
The Emerald City is infamous for its high property prices. There are financing solutions available, even at these big numbers. They just might not come in the format and from the main street banks you’d expect.
Seattle, Washington’s high property prices can cause home buyers and owners a lot of frustration when it comes to getting financing. Many don’t try to buy because they believe the amount they would need for a down payment is just too far out of their reach. Others needlessly pay all cash for luxury homes, and take on too much risk, and lose important financial benefits of having a mortgage. Then there are those who are bullish on buying a home in Seattle or who want to refinance, but then get frustrated after approaching the wrong types of mortgage lenders and not getting the answers and great loan deals they hoped for.
So, how much can you finance? What are the loan limits? Could a jumbo mortgage help you get the money you need? If so, who offers the best deals on them? What alternatives are there to jumbo mortgage loan programs?
Seattle Property Prices
The average home value in Seattle, WA is around $780,000. Zillow predicts this number will rise by almost 6% more by August 2021. Or an additional $46,800, to around $824,000.
In some Seattle neighborhoods the average home price can even be much higher than this. Compare this to the national average home listing price of just $350,000 in September 2020, according to Realtor.com.
Even the COVID-19 pandemic, ensuing lockdowns, civil unrest and the uncertainty around the presidential election couldn’t slow down Seattle home prices. So, for most, now is the time to buy a home. That’s true whether it is your first, second, an upgrade to more space or downsizing for retirement. Those considering refinancing can also see that incredibly low interest rates make this one of the best times in history to get a new loan too.
Mortgage Loan Limits
In 2020 the Federal Housing Finance Agency (FHFA) raised the maximum conforming loan limit for mortgages on single unit properties from $484,350 to $510,400.
That still leaves an almost $270,000 financing gap for the average home buyer in Seattle. Or would require a minimum of a 35% down payment on even a modest home.
Fortunately, the FHFA has provided several exceptions. See the national conforming loan limit map by county for more details. This includes several breaks for Washington State mortgage borrowers in Pierce, Snohomish and King County. In these three counties the expanded conforming loan limit is extended to $741,750, in order to account for the exceptionally high cost of living.
Obviously, this is still well below the average home price.
These conforming loan limits apply to the traditional loans offered by most main street banks, and which are in turn sold onto Fannie Mae and Freddie Mac.
What Is A Jumbo Mortgage Loan?
Anything above these conforming loan limits is categorized as a jumbo mortgage loan.
The good news is that jumbo mortgages are available through some Seattle mortgage brokers and lenders.
So, how big of a mortgage can you get?
Most conventional lenders have relatively low maximum loan limits. They just don’t want the risk of being exposed to such a huge loss if one borrower defaults. Though if you are a billionaire like Mark Zuckerberg, then there really may be no limits on the size of mortgage you can obtain.
There can be many benefits of a larger jumbo mortgage loan. It can provide some liability protection and make you less of a target for criminals. It gives you more cash liquidity in the bank, versus all being tied up in equity. You may also benefit from additional tax deductions.
How Much Down Payment Do I Need?
If you can keep your loan amount within the conforming loan limit, then it still may be relatively easy to secure a 95% or 97% LTV loan. Meaning you’ll only need a 3% to 5% down payment.
Some jumbo mortgage loan programs can be very aggressive as well, depending on the other details of your loan application. However, if you plan to need a loan of $1.5M or more, expect to need a down payment of at least 20%.
There are a few exceptions and hacks here that we address below.
How Do I Qualify For A Jumbo Mortgage Loan?
Even though jumbo mortgage loans have become more common due to rising property prices, they still represent a larger risk to lenders and their investors.
This may lead to needing a strong credit score, having additional assets and cash reserves in the bank, and a modest debt-to-income ratio (DTI).
However, jumbo mortgage borrowers may also find more flexibility and exceptions available to them as well. You may have compensating factors that help if you need a larger loan amount as well.
Alternatives To Jumbo Mortgage Loans
There are some alternatives to having to take a jumbo mortgage.
One is to explore new areas. There is a lot more to Seattle than downtown. It’s surrounding neighborhoods and suburbs may offer a whole lot more home for your money. Meaning you don’t need such a large loan or doan payment.
If you are a military service member or veteran, you may qualify for a VA home loan. The loan limits were recently lifted to allow you to buy more home with no down payment.
Your Seattle mortgage broker can also help you creatively structure your purchase to get the best rates and loan deals. Such as using an 80/20 piggyback second mortgage, or 80/10/10 loan.