What is a Washington State Jumbo Loan?
A jumbo loan in Washington State is any home loan that exceeds conforming loan limits. Depending upon the property location. and the size of the loan, you may need a jumbo mortgage to finance your purchase.
Home prices in Washington State, like much of the West Coast, are notoriously expensive compared to much of the United States. Throughout Washington, prices climbed over the past couple decades as more people moved to the area. Jumbo loans in Washington State are more common now than they’ve ever been, particularly in counties like San Juan, King, Pierce and Snohomish.
Conforming Loan Limits for Washington State
Conforming loan limits are set by the Federal Housing Finance Agency (FHFA). The FHFA aggregates data about repeat home sales and refinances across the Unites States and creates a weighted average called the House Price Index (HPI). The data comes from Fannie Mae and Freddie Mac, dating back to 1975.
The FHFA then determines the maximum loan amounts private lenders can make that still qualify as ‘sale-able’ to Fannie Mae and Freddie Mac (two Government Sponsored Entities, or GSEs, that acquire most of the loans made in the United States). Loans that fit within conforming loan limits (and other variables like credit scores, property eligibility, etc.) are thusly called conforming loans.
If the size of a loan exceeds the established conforming loan limits, it’s a jumbo loan. That said, FHFA makes some adjustments to conforming loan limits based on regional home price characteristics. Yep, conforming loan limits in Seattle are higher than you would find in smaller communities like Olympia. If you live in Seattle, you get a little more headroom, a higher conforming loan limit.
The two conforming loan limits in Washington State are:
- $424,100 in most Washington counties
- $592,250 in higher priced markets, such as Seattle
Washington State Jumbo Loan Requirements
Just so you know, the loan amount is what determines whether a jumbo loan is required, not the property value.
Say you put down $150,000 on a home that appraised at 650,000. Your loan would be $400,000, well below the conforming loan limit (in most Washington counties) of $424,100. In this situation, you wouldn’t need a jumbo loan.
As mentioned, the need to use a Washington jumbo loan kicks in based on the HPI in any given region.
Upward revisions to high-cost areas keep more homes under the conforming limit, essentially making more inventory available for financing without the need for jumbo loan. However, even with the loan limit adjustment for the Puget Sound, many borrowers still need to use a jumbo loan. Here are the high-cost counties in Washington State where the conforming loan limit goes up to $540,500.
Washington High Cost Counties
- San Juan
In counties other than the four above, jumbo loans are required if your loan amount exceeds the conforming loan limit of $424,100.
Property Eligibility: Types of Homes
- Owner occupied
- Second homes
- Investment properties
- 1-to-4 unit primary residence
Loan Limit Adjustment: Number of Units
Conforming loan limits also increase based on the number of units in the building. Meaning, there’s some additional headroom for a duplex or triplex. Below you will find Washington State conforming loan limits by property type.
WA CONFORMING LOAN LIMITS
|Units||Most Counties||High-cost Areas|
Washington Jumbo Loan Borrower Eligibility
Because jumbo loans are typically held by the lender (instead of packaged and sold to Fannie Mae or Freddie Mac) loan requirements are not as universally prescribed. Programs vary on a lender-by-lender basis. However, some generalization can be made. Here are some typical borrower requirements:
- 20% down payment typically gets the best interest rate
- 10% down (90% LTV) is still possible
- Minimum FICO score starts from 680-740
- Debt to income ratios (DTI) between 38-50%
Jumbo Loan Terms
- Fixed rate or adjustable rate mortgages available
- $2 million loan limit ($3.0M reviewable case-by-case)
- Mortgage insurance required on loan to value (LTV) above 85% to 90%
- A jumbo is loan a mortgage made in an amount higher than the conforming limit.
- Conforming loans must not exceed the maximum loan amount set by the FHFA and meet Fannie Mae/Freddie Mac guidelines.
- Loan limits vary by county.
- Loan limits vary based on the type of dwelling financed.
Washington State Jumbo Loan FAQs
How do I know if I need a jumbo loan in Washington State?
If you’re buying a bigger house and need financing that exceeds the conforming loan limit, you’ll need a jumbo mortgage. You’ll get some extra breathing room in high-cost counties where loan limits are set higher than other areas.
Do I need to make a 20% down payment?
You can get a jumbo loan in Washington State with less than 20% down if other variables, like an excellent credit score, balance some of the risk. As loan amounts increase (say, you start heading over the $1M mark), lenders might get tighter with the down payment requirement.
Will I need to carry mortgage insurance?
If the loan-to-value (LTV) is greater than 80%, private mortgage insurance (PMI) is required on jumbo loans.
I noticed jumbo loans have higher interest rates. Why is that?
Jumbo loans typically have 1/4 to 1/2 percent higher interest rates than conventional or government-insured loan products. The higher rate is a risk premium because bigger properties may be harder to liquidate in the case of foreclosure.
What properties are eligible for jumbo loan financing?
1 to 4 unit properties, second homes and vacation homes may all be financed with a jumbo loan.
What terms are available on a jumbo mortgage?
You’ll have a choice of a fixed-rate (FRM) or adjustable-rate mortgage (ARM).