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 2018?
Short answer: 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 $453,100. So a jumbo loan is one that exceeds that amount. But certain counties, like those in the Seattle metro area, have higher jumbo loan thresholds.
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 2018 conforming loan limits for single-family homes across Washington State:
Anything above these amounts is a jumbo mortgage. For example, in the Seattle metro area, a single-family jumbo loan is one that exceeds $667,000 (the current conforming limit for that area). In San Juan County, using a conventional loan for an amount above $483,000 means having to go jumbo. For the rest of Washington State, a jumbo loan is a conventional mortgage that exceeds $453,100.
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.
In Clark County, Washington, for example, the median home price was around $332,500 in 2018. The conforming loan limit for the county is currently $453,100. That’s well above the median price for a house in the area. Most other counties in the state work out the same way.
The Seattle metro area is a bit different, however. Home prices in the area rose significantly over the last few years. As a result, the median sales price in the metro area is now higher than conforming loan limit. This means that home buyers in and around Seattle might have a harder time find a suitable property within conforming limits — and a higher percentage of those buyers may have to use jumbo mortgage loans when making a 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 $453,100. In the Seattle metro area, a jumbo mortgage loan is one that exceeds the elevated limit of $667,000.