The short holiday week brought a flurry of economic reports last week. Highlights included pending home sales, the S&P Case-Shiller Housing Market Indices and the FHFA home price index. No reports were released on Thursday and Friday in observance of the Thanksgiving holiday.
The median home price in Seattle climbed above $700,000 earlier this year, and it’s still rising. As a result, a higher percentage of home buyers in Seattle are using jumbo mortgage loans to finance their purchases.
You might think a jumbo loan would come with a higher interest rate, since there’s a higher amount being borrowed. But that’s not always the case. In fact, Seattle jumbo loan rates can sometimes be lower (on average) than the rates assigned to conforming mortgage loans.
Getting a “Big” Mortgage Loan in Seattle
A conforming loan is one that meets the size requirements used by Freddie Mac and Fannie Mae, the government-sponsored corporations that buy loans from lenders. These limits vary by county because they are based on home prices.
When a person borrows more than the conforming loan limit for his or her county, it’s referred to as a jumbo mortgage loan.
In King County, Washington, the conforming loan limit for a single-family property is $592,250 (as of 2017). So anything above that would be considered jumbo.
Some mortgage shoppers shy away from jumbo loans in Seattle, thinking they will have to pay a higher mortgage rate. But that’s not always the case. There are a variety of factors that determine the rate you receive on a home loan, including your credit score, the amount you put down, and other factors.
The data show that Seattle jumbo loan rates are not always higher than their conforming counterparts. In fact, a report published earlier this year showed quite the opposite.
Report: Seattle Jumbo Loan Rates Lower Than Conforming
In August 2017, the Mortgage Bankers Association (MBA) published a report that showed borrowers nationwide were getting lower rates on Seattle jumbo loans than the smaller conforming mortgage loans.
- When that report was published, the average interest rate assigned to 30-year fixed mortgages with conforming loan balances of $424,100 or less was 4.12%.
- The average interest rate for jumbo loans (those that exceeded the baseline loan limit of $424,100) was 3.99% … 13 basis points below the average for conforming loans.
Obviously, interest rates have changed since then. But the point is that Seattle jumbo loan rates are not automatically higher than conforming mortgage loan rates, just because there’s a higher amount being borrowed. It varies.
Joel Kan, an economist with the MBA, told CNBC:
“A strong appetite for jumbo loans in a highly competitive jumbo market has led to increased availability and lower pricing … over the past few years.”
In the past, jumbo loan rates in Seattle and nationwide were almost always higher than the rates assigned to conforming mortgage products (on average). But this trend reversed a few years ago, and since then we have often seen lower average rates for jumbo mortgages than their smaller conforming counterparts.
According to a related report from CoreLogic, a property and financial analytics company:
“…since mid-2013 a jumbo loan has been cheaper to borrow than a conforming mortgage loan, by an average of 21 basis points [or 0.21%] during the first quarter of 2017.”
Get a Quote to Find Out Where You Stand
This article underscores the importance of getting a specific rate quote tailored to your particular situation. The average interest rates reported by industry groups (and widely covered by the media) are useful in the sense that they help us track trends over time. But the actual rates assigned to a particular home loan can vary based on a number of factors.
The moral of this story: Seattle jumbo loan rates are not always higher than conforming, and in some cases they can be quite a bit lower. There are several variables that can affect your borrowing costs. So the logical next step would be to obtain a rate quote based on your situation.