What is the Jumbo Loan Limit in Seattle?

This article was originally published on January 17, 2021. It was updated on June 21, 2024.

Do you need a jumbo-sized mortgage loan to buy a home in Seattle?
The Emerald City has a well-earned reputation for high property prices. This can cause home buyers and owners a lot of frustration when it comes to financing or refinancing their mortgages. 

Many potential buyers are deterred from even trying 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, losing the 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 they hoped for.

While the homebuying process can be complex, the expertise of a mortgage broker can help you streamline that process.
In this article, we’re going to provide a comprehensive guide to making informed decisions about your home financing in Seattle. You'll learn about several different financing options, as well as answers to questions on how much you can finance and current loan limits. We'll also explore whether or not  a jumbo mortgage is the solution you need — and where to get the best deals for such loans. 

Seattle Property Prices

First, let's take a closer look at the current state of housing prices in Seattle.

The average home value for all of Seattle is currently more than $884,000. Of course, in some neighborhoods the average home price can be significantly higher than this. For example, in West Queen Anne, average home prices are nearly $1.2M.

These are much more expensive than the national median home listing price of just $449,000 (according to Realtor.com as of April 2024).

For most of Washington State, the conforming loan limit decided by the federal housing finance agency is just $766,550. That means the mortgages that are backed by the U.S. government, through the Federal National Mortgage Association (Fanny Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), have a maximum amount for a single family home of $766,550. 

High Balance Conforming Loans

With the conforming loan limit in place, many buyers can’t find a suitable home unless they have access to a sizable down payment. 

So, how does a normal person buy a home in Seattle (or its surrounding areas) without tying up all their cash in an oversized down payment?

This is where jumbo loans come in.

Anything above the conforming loan limit is called a jumbo loan. 

As mentioned in the section above, for most of the U.S., the conforming loan limit (mortgages backed by the government) is set at $766,550. 

Note: For some high-cost areas like parts of California, Hawaii, and New York, the cap may be set higher. Each county's conforming loan limit caps can be found on the Federal Housing Finance Agency (FHFA) website.

Loan Limits by the Federal Housing Finance Agency (FHFA)

image courtesy of fhfa.gov

Why are Loan Limits in Place?

These government regulations are meant to discourage banks from risky loans that encourage buyers to take on homes they can’t afford. 

However, in white-hot markets like Seattle, conventional conforming loans place potential home buyers at a distinct disadvantage.

Here’s why…

High Prices, Big Mortgages

It’s incredibly easy to exceed the conforming loan limit in place through Freddie Mac and Fannie Mae. Even with the higher limits in an area like King County (see map above), you’d be hard pressed to find a home with a standard down payment that stays within the limit.

A modest home in Fremont, for example, will cost around $1,000,000. Even if you put down 20%, the mortgage would still exceed the conventional loan limit in Seattle.

So what can buyers do? 

Anything above these conforming loan limits is categorized as a jumbo mortgage loan. 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. 

The good news is that jumbo mortgages are available through mortgage brokers and other lenders. 

What’s the Non-Coforming Loan Limit?

So, how big of a mortgage can you get?

If you’re a high-earner with a high net worth, there may be no limits on the size of mortgage you can obtain. 

For buyers who are in a position to afford a larger mortgage, there are many benefits of a jumbo loan. It can provide some liability protection and give you more cash liquidity in the bank, versus all being tied up in equity. You may also benefit from additional tax deductions.

Private lenders offer buyers several creative solutions. Because they do not require Freddie Mac or Fannie Mae backing, these lenders can make their own rules for approval. Every lender has their own goals, so pricing, approval process, and timeline differ wildly.

If you’re going to seek out a jumbo loan, be sure to compare several lenders' products. Some might specialize in second homes, others might not have favorable pricing. Shop around until you find the loan product that fits your personal needs.

Exceeding the High Balance Loan Limit in Seattle

As you can tell by the Fremont example we used above, the most desirable neighborhoods in Seattle will typically far exceed the jumbo loan limits. 

This does not mean that you should give up on seeking homes in your desired neighborhood. What it does mean is that you should prepare for a jumbo loan. 

If you have a high-paying job, lots of assets and a great credit rating, you'll have competitive rates offered to you. Even if you lack these positive traits, approach your own bank to see what might be best for your financial situation. 

You should also talk with at least two other lenders to compare rates and terms. As we mentioned, different lenders have different incentives. Your bank may offer a better rate but have more stringent documentation. 

In contrast, an independent mortgage lender that processes and funds their own loans may have a more favorable processing time, easier qualification benchmarks, and a stronger rate/fee structure.

Start your search online and by asking a real estate professional for referrals early in your house hunt.

What Do You Need To Secure A Jumbo Loan?

When it comes to getting a jumbo loan, there are a few terms and processes to learn in order to understand the process. 

The loan-to-value ratio represents the value of the loan compared to the value of the asset the loan was used to purchase. For example, if the home is worth $1,000,000 and the loan value is $850,000, the loan-to-value ratio is 85%. 

The loan-to-value ratio can be as high as 97% for a conforming loan and 95% for a high balance conforming loan.

We mentioned earlier how jumbo loans offered by private lenders have their own rules. This might mean mortgage down payments of 20%, 25%,  30%, or more for loans exceeding $1.5 million. However, some major lenders advertise smaller down payments or other favorable terms like lower interest rates.

In the past, jumbo loans were typically associated with higher interest rates than conforming loans. Now, lenders are incentivised to offer jumbo loans as they are often working with desirable, high-net-worth individuals; therefore, interest rates are often the same, and sometimes even less than conventional loans. 

Assets can differ from conforming loans too. Typically a Fannie Mae or Freddie Mac loan might not require any extra reserves (liquid assets that could be used to pay the mortgage if needed) in the bank after you get the keys. Jumbo loan lenders typically ask for 6 - 12 months; however, a 20% down payment could allow for as little as $0 in extra reserves.

Credit scores for jumbo loan borrowers have to be high as it is a larger liability. Expect a score of 700 or better to qualify for a jumbo loan. The best loan terms are typically reserved for people with credit scores of 760 or better.

Bigger Mortgage, Smaller DTI

As jumbo loans mean a sizable mortgage, the debt-to-income ratio is a very important number for lenders to consider in order to calculate risk. 

The debt-to-income ratio (DTI) compares monthly debt to monthly gross income. Gross income is your pay before taxes and other deductions, while debt includes all monthly debt payments including credit cards, mortgage payments, car loans, or student loans. They do not consider insurance, cell phone bills, utilities, etc. 

For any mortgage, the buyer’s DTI must meet the Consumer Financial Protection Bureau standard. That means a DTI of no more than 43%. For jumbo loans, a DTI of 36% is more desirable. 

Prepare to Document All

To qualify for a jumbo loan, you’ll need a good credit score, evidence of a sufficient and stable income, and significant cash reserves. 

Providing documentation is often the most difficult task for borrowers, so it’s important to understand what will be required before you even get started. Think of the documentation as a safeguard for the person you’ll be borrowing money from. Most lenders need you to prove you have sufficient income and assets to afford the property you want to purchase.

Jumbo loans are designed to let qualified buyers get a home they can afford. That’s why lenders look for financially responsible people who happen to be living and working in an expensive market. W-2 forms, check stubs, investment statements and bank statements are typical requests to prove consistent income that will allow you to make your mortgage payments.

If you are self-employed, expect to provide your tax documents and detailed information about your business. If you have large assets available, you may be able to count earnings from the assets as income. Due diligence on the property is also required. Expect a lender to ask for up to two appraisals.

Jumbo Mortgage Loan Competition

As we hinted at earlier, when applying for any mortgage loan, it’s best to compare different lenders' products. 

Unlike conventional conforming loans, jumbo loan lenders can adjust interest rates, required down payments, or ratios to earn your business. In general, you will pay a higher interest rate for loans categorized with more risk. However, many times, the interest on a jumbo loan can be the same or less than the rates on Freddie Mac or Fannie Mae conforming mortgages. Additionally, lenders can waive fees, closing costs, or appraisals to gain your business.

Many lenders skip Private Mortgage Insurance for these types of loans because, again, jumbo borrowers are typically granted to very desirable (and profitable) high-net-worth customers. 

In fact, with the thorough vetting and documentation required, many jumbo borrowers are a lower risk than conforming loan holders. That’s why some lenders will reduce interest rates and or fees.

Are Jumbo Loan Terms Different From Conforming Loans?

Seattle jumbo loans are available with either fixed or adjustable interest rates. They come with a variety of terms: 10, 15, 20, 25 or even 30 years. However, 15- and 30-year mortgages are the most common.

To choose what terms are right for you, it’s important to think ahead when comparing mortgages. If your income is consistent and you plan on being in your house for a long time, a 30-year fixed mortgage might be the right choice. 

However, if your income varies wildly, you expect to relocate or your family is changing size, you may want more flexibility. Hybrid loans with a short fixed rate term and an adjustable rate may offer better payment terms.

This is another reason why it’s important to shop around. You want to work with an expert who offers unique products suited to your situation and property.

Jumbo Loan Alternatives

Sometimes the best alternative is to adjust the amount you borrow to reach the jumbo loan limit in Seattle. Maybe you want to take advantage of the reduced documentation or more lenient appraisal process.

Here’s how to do that:

VA Home Loans

In 2020, the conforming loan limits were lifted for VA home loans. That means veterans can buy a home or up to four units, for $1 million with a VA mortgage. 

Piggyback Loans

You can also use a bundle of several smaller loans. This arrangement is called a piggyback loan. 

Government regulation requires that you have sufficient assets and income to repay each loan individually so this tends to be a paperwork intensive process.

80/20 Piggyback Loan

This type of loan has a primary mortgage of 80% of the property’s purchase price. The secondary mortgage covers the remaining 20% of the purchase price.

80/10/10 Piggyback Loan

With this loan approach, the primary mortgage is again 80% of the property value. The second mortgage covers 10%. You contribute a 10% down payment. 

More than a few piggyback arrangements use balloon loans with three- or 10-year terms so you need to be prepared to pay extra with such loans, otherwise you will need to refinance or sell before the balloon payment becomes due. That means you might have to pay off one or both loans or refinance in a short amount of time.

You should also be aware that piggyback loans will not solve the problems of poor documentation, poor credit or other obstacles to a jumbo mortgage, as they’re often viewed as more risky to lenders. 

Interest rates on second mortgages and lower down payments are higher than rates on first mortgages. Given the very large loans you must take out for a higher priced home, your total borrowing costs will also be higher.

Seattle’s Mortgage Broker Will Get The Best Deal For You

Reading through all of the information above, it’s completely understandable why a prospective homebuyer might feel overwhelmed.

When it comes to jumbo loans, the process can be daunting. From loan limit values to ratios to collecting documentation, there’s a lot to understand, prepare, and sign off on.

Seattle’s Mortgage Broker is here to help you simplify the process of getting a mortgage, whether it’s conforming or jumbo. Our experience and expertise in home loan regulations allow us to offer the best loan products in Seattle — all designed to get our clients into the home they want.

Not only do we find you competitive rates and lower monthly payments to keep as much cash as possible in your pocket; we move quickly. We’re able to close in as little as eight days.

Ready to get the best deal possible for your unique situation? Click here to get a home loan quote today!