A jumbo loan in Seattle doesn’t have to come with a jumbo-sized mortgage rate. There are certain things borrowers can do to secure a lower rate on one of these “oversized” home loans.
The median home price in the Seattle area has now risen above $700,000, as of July 2018. The 2018 conforming loan limit for King County, Washington is set lower than that, at $667,000. This means there are likely more home buyers in Seattle using jumbo loans to buy a home these days.
Because of these trends, we’ve been publishing a series of informative articles on the subject. Today, we’ll talk about what home buyers can do to get the best possible mortgage rate on a jumbo loan in Seattle.
Seattle Jumbo Loans Defined
As mentioned above, the conforming loan limit for a single-family home purchase in King County is $667,000. This is the limit used by Freddie Mac and Fannie Mae, the two government-sponsored enterprises that buy and sell bundled mortgage loans. When a conventional loan in Seattle exceeds that amount, it is referred to as a jumbo loan and may have stricter qualification guidelines.
Tips for Getting the Best Mortgage Rate
It’s logical for borrowers to expect a higher mortgage on a jumbo loan in Seattle, compared to a smaller conforming home loan. But the opposite is often true. In many cases, borrowers who take out a jumbo loan that exceeds the conforming limit are able to secure a lower interest rate. (We’ve written about this in the past. See this article for a detailed explanation.)
Here are three strategies for getting the best mortgage rate on a Seattle jumbo loan:
1. Good credit: A credit score is a three-digit number that’s computed based on information within a person’s credit reports. Generally speaking, a higher score will help a borrower qualify for a better rate on a jumbo loan — or any other type of mortgage for that matter. For a conforming loan, a credit score of 740 or higher is typically needed to get the best rates and cost. Many jumbo loan programs have additional price improvements when the borrower’s credit score exceeds the 760 – 780 range.
2. Down payment: Making a larger down could also help a borrower secure the best possible mortgage rate for a Seattle jumbo loan. Putting more money down essentially reduces the level of risk for the loan, which could help you qualify for a lower rate. Please contact us if you have questions about the down payment requirements for jumbo mortgage loans in Washington State, and how it might affect your rate.
3. Paying points: In the context of mortgage loans, a “point” equals one percent of the amount being borrowed. So on a $700,000 home loan, one point would come to $7,000. Paying points is another way to secure a lower mortgage rate. You’re essentially paying more up front, at closing, in exchange for a better interest rate that could save you money over the long term.
Every lending scenario is different, because every borrower is different. So some of the strategies mentioned above might not apply to your particular situation. That’s why it’s so important to speak with a knowledgeable loan officer who can explain the pros and cons of different financing options.