Do I Need to Use a Jumbo Loan to Buy a Home in Seattle?

Seattle home buyers tend to have a lot of questions about their mortgage financing options, including the maximum amount they can borrow. Today, we will address one of the most common questions relating to mortgage size:

Do I need to use a jumbo loan when buying a home in the Seattle area?

This will depend on the amount you need to borrow. A jumbo loan is anything that exceeds the conforming loan limit for your county, as explained below. So if you borrow above that threshold, you’ve crossed into jumbo mortgage territory. And that’s okay, as long as you have sufficient income.

What Is a Jumbo Mortgage Loan In Seattle?

There tends to be a lot of confusion about the term “jumbo” loan, versus a conforming mortgage loan. The difference has to do with the amount being borrowed and how it relates to those county-specific limits mentioned above.

A conforming home loan is one that meets the size limits and other requirements established by the Federal Housing Finance Agency. These loans can be sold to Fannie Mae and Freddie Mac, the two government-sponsored mortgage buyers. These limits vary by county because they are based on median home prices.

A jumbo mortgage loan, on the other hand, is when a person borrows more than the conforming loan limit for the county where the home is located.

If you buy a home in the Seattle area that’s equal to or less than $977,500, you wouldn’t need to use a jumbo loan. Even if the home price was only slightly above that limit, your down payment might reduce the loan amount to keep it within the conforming range.

But if you need to borrow more than $977,500 for a Seattle home purchase, you would probably end up using a jumbo mortgage loan.

How These Limits Relate to Home Prices

We talked about the conforming loan limits that are established by the federal government, and how they can determine whether or not a person needs to use a jumbo loan.

Now, let’s look at current home prices around the Seattle metro area. This will help you understand which housing markets have a higher percentage of homes priced above conforming loan limits, compared to those with more affordable homes.

(Note: These are the median prices reported by Zillow as of January 2024.)

A person buying a home in a city like Tacoma, Everett or Kent would probably have an easier time finding a property that falls within the conforming loan limits.

For example, the city of Kent currently has a median home value just north of $601,000. The current conforming loan limit for the surrounding county is $977,500. That means the midpoint price range for the Kent real estate market is around $300,000 less than the conforming loan limit.

On the other hand, a person buying a home in Bellevue or Sammamish might be more likely to use a jumbo mortgage loan. That’s because the median price in both of those cities is currently well above the conforming loan limit for the Seattle metro area.

Qualification Criteria and Down Payments

There’s nothing wrong with using a jumbo loan, as long as you have the income necessary to qualify for it. The criteria can be a little more strict, when compared to a conforming loan. That’s because there’s more money being loaned out and a higher level of risk for all parties involved.

Jumbo loans sometimes require a larger down payment as well, when compared to a smaller loan that falls within the conforming price range. This is why some home buyers in the Seattle area prefer to avoid using a jumbo loan.

But for those borrowers with sufficient income and a strong credit history, the jumbo loan can be a viable mortgage financing option. These “oversized” loans can be useful if you are looking to buy a more expensive home or a home in a high-cost area.

Key Takeaways from This Article

We’ve covered a lot of information in this article, and it’s an important subject for borrowers to understand. So let’s wrap up by summarizing some of the key takeaway points:

• Jumbo loans are mortgages that exceed the conforming loan limit set by the federal government for a specific county.
• The threshold for jumbo loans in the Seattle area is currently $977,500. This includes King, Pierce and Snohomish counties.
• If the amount borrowed falls below that limit, a jumbo loan wouldn’t be necessary.
• On the other hand, a person who borrows more than the conforming limit will likely have to use a jumbo mortgage product.
• Home buyers in cities like Tacoma, Everett, or Kent are more likely to find properties within the conforming loan limits.
• Buyers in Bellevue, Sammamish, and other higher-priced markets often need to use jumbo loans to finance their purchases.
• Jumbo loans tend to have stricter qualification criteria and may require a larger down payment compared to conforming loans.

Need a mortgage loan in the Seattle area? Sammamish Mortgage serves the entire Seattle area and the rest of Washington. We offer a broad range of financing options, including both conforming and jumbo loans. Please contact us with your mortgage-related questions or to apply for a loan.