Summary: In this post, we will go over the basics of jumbo loans in Washington State in 2019. We will provide a short definition of jumbo loans, cover current rates in WA State, and then discuss how these current rates relate to current home prices.
This is the latest entry in our blog series that answers frequently asked questions from Washington State home buyers. Today’s question is:
What is a jumbo loan in Washington State in 2019?
A jumbo loan is a conventional (not government insured) mortgage loan that exceeds the conforming size limit for sale to Freddie Mac and Fannie Mae. These limits vary by county. For most counties in Washington State, the conforming loan limit is $484,350. So a jumbo loan is one that exceeds that amount. But certain counties, like those in the Seattle metro area, have higher jumbo loan limits.
What Is a Jumbo Loan in Washington State?
Most mortgage programs have certain size restrictions or limitations. This is true for FHA, VA and conventional home loans. (A conventional loan is one that is not backed or insured by the federal government, which sets it apart from the FHA and VA programs.) When a loan exceeds these size limits, it is referred to as a jumbo loan.
The term “jumbo” is usually applied to conventional mortgage loans. This label means that the loan is too big to be acquired by Freddie Mac or Fannie Mae, the two government-sponsored enterprises (GSEs) that buy and sell bundled mortgage loans. A Washington State jumbo loan exceeds these size restrictions, and therefore it is considered a “non-conforming” mortgage loan.
Getting back to the question at hand: What is the specific jumbo loan amount in Washington State? This depends on the county where the home is located. Here are the 2019 conforming loan limits for single-family homes across for different counties Washington State:
Unlike in 2018, Washington State no longer has a separate loan limit for San Juan County. If you compare these limits with the limits for 2018, you’ll notice that they’ve increased substantially.
Anything above these amounts is a jumbo mortgage. For example, in the Seattle metro area, a single-family jumbo loan is one that exceeds $726,525 (the current conforming limit for that area). The same is true for a single-family loan obtained in either Pierce or Snohomish County. For the rest of Washington State, a jumbo loan is a conventional mortgage that exceeds $484,350.
Generally speaking, mortgage qualification criteria can be a bit more strict for jumbo loans, simply because there’s more money being loaned out and therefore higher risk. Borrowers who want to take on a larger mortgage should have good credit, stable income, and a manageable level of debt.
Please contact us if you have questions about qualifying for a jumbo loan in Washington State.
How They Relate to Home Prices
As you might have guessed, jumbo non-conforming mortgage loans are generally used by people who are purchasing higher-end properties. By design, the conforming loan limits are usually set higher than the median home price within a particular county. In theory, this gives home buyers plenty of properties to choose from without having to venture into jumbo mortgage territory.
Related: High-balance loans for borrowers
In Clark County, Washington, for example, the median home value was around $352,100 in April 2019, according to Zillow. The conforming loan limit for the county is currently $484,350. That’s well above the median value for a house in the area. Most other counties in the state work out the same way.
The Seattle metro area presently works the same way, although this hasn’t always been the case in recent years. Home prices in the area have recently declined by a modest amount over the past year. As a result, the median home value in the Seattle metro area is a bit lower than the conforming loan limit. But the difference is quite small. According to Zillow, as of April 2019 the median home value in Seattle is $723,300, and the loan limit is $726,525, a difference of just over $3,000. In previous years, median home values were actually higher than the loan limits. Even though the median value is now a bit lower, buyers in the Seattle area are still relatively more likely to have a more difficult time finding a suitable property within the conforming loan limits. Consequently, Seattle buyers will also be more likely to take on a jumbo mortgage loan when making their purchase (compared to other parts of the state).
To recap: What is a jumbo loan in Washington State? In most counties, it’s a home loan that exceeds the conventional / conforming limit of $484,350. In the Seattle metro area, a jumbo mortgage loan is one that exceeds the elevated limit of $726,525.