Can I Get a Mortgage Loan Over $1 Million in Seattle?

December 6, 2022
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December 6, 2022
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The Seattle real estate market has gotten more expensive over the past few years. As a result, there’s now a higher percentage of homes priced over the $1 million threshold. And this has a lot of home buyers wondering the same thing:

Can I get a mortgage loan for over $1 million in the Seattle area?

The short answer is yes. Borrowers with sufficient income and good credit can obtain a home loan for more than $1 million. But there are some stipulations you should know about, which we’ll cover below.

Seattle Mortgage Loans Over $1 Million

When it comes to their size, mortgage loans can be categorized as either conforming or jumbo.

  • A conforming loan is one that meets the size requirements and other parameters established by federal housing officials. A conforming loan can be sold to Freddie Mac or Fannie Mae through the secondary mortgage market. Conforming loan size limits vary by county and are based on median home values.
  • A jumbo loan, on the other hand, is one that exceeds the conforming loan limits mentioned above. A jumbo mortgage cannot be sold to Freddie Mac or Fannie Mae. As a result, these loans tend to have stricter qualification criteria.

In 2023, the conforming loan limit for the Seattle metro area counties of King, Pierce and Snohomish will be set at $977,500. So if you borrow more than $1 million for a home purchase in the Seattle area, you would be using a jumbo mortgage loan.

Jumbo (or non-conforming) home loans represent a higher risk to the lender, and for two reasons. First of all, there’s a larger amount of money being borrowed. Secondly, these loans cannot be sold to the government-sponsored mortgage buyers Freddie Mac and Fannie Mae.

Now let’s shift gears and talk about some of the requirements for obtaining a mortgage loan in excess of $1 million.

  1. A good credit score

All borrowers can benefit from having good credit. A good credit history and score can help you qualify for a mortgage loan with a good interest rate. But having good credit is even more important when it comes to jumbo mortgage loans.

If you want to borrow more than $1 million for a home purchase in the Seattle area, you’ll need to have a good credit score and history. This shows that you have borrowed and repaid money successfully in the past, an important quality for someone seeking a mortgage loan over $1 million.

There is no specific credit score threshold that applies to all borrowers across the board. Credit scores are part of a broader qualification process. But generally speaking, a higher score will increase your chances of qualifying for a mortgage loan over $1 million in the Seattle area. While a lower score could have the opposite effect.

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  1. A larger down payment

Every jumbo lending scenario is different, because every borrower is different. But in general, home buyers who are seeking a jumbo mortgage loan over $1 million usually have to put more money down, compared to someone with a smaller loan.

This relates back to the risk factor we discussed earlier. Home loans that exceed $1 million represent a higher risk to the bank or lender that offers them. As a result, borrowers typically have to make a larger down payment on these loans.

In contrast, Seattle-area home buyers who use conforming mortgage loans can often put down as little as 3%. But the down payment requirement is usually higher for a jumbo product.

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  1. Sufficient income and a manageable level of debt

Home buyers seeking a mortgage loan over $1 million in the Seattle area must also be able to document their income. This is for obvious reasons. In short, you’ll need to have enough income to manage the monthly payments for the amount you’re trying to borrow.

Mortgage lenders often use the debt-to-income (DTI) ratio to assess these things. As you might have guessed, this is a comparison between the amount of money a person earns through income, and the amount they spend on all recurring debts.

When borrowing more than $1 million, home buyers typically need to keep their total DTI ratio at or below the mid-40% range. That number is not set in stone, but it does represent a common threshold within the lending industry. In some cases, exceptions can be made to allow for a higher debt ratio.

This qualification process serves everyone’s best interests. As a borrower, the last thing you want to do is take on too much mortgage debt in relation to your income. To help guard against this, lenders use the DTI ratio and other tools to qualify mortgage applicants.

Need a loan? Do you need a mortgage loan for more than $1 million in the Seattle area? We can help. We offer a broad range of home loan options, including both conforming and jumbo. Please contact our staff with any financing questions you have, or to apply for a loan.

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