For many individuals and families, owning a home is a lifelong dream. However, with rising real estate prices, some may find themselves seeking financing beyond the conforming loan limit. In this instance, you’d need to apply for a jumbo loan.
What is a jumbo loan?
A jumbo loan in Washington state is a type of mortgage that enables homebuyers to borrow more than the limits set by the Federal Housing Finance Agency (FHFA) for conforming loans. The conforming loan limit (CLL) is the maximum amount of money that a lender will provide to borrowers at a specific interest rate and is established each year. Jumbo loans are necessary for homebuyers who want to purchase a high-value property, such as a luxury home, that exceeds the conforming loan limit.
If the home you’re purchasing will require you to borrow more than the CLL, you’ll need to apply for a jumbo loan. Because of the larger loan amounts, jumbo loans typically carry stricter requirements and higher interest rates than conforming loans. Lenders may require a higher down payment, a lower debt-to-income ratio, and a stronger credit score to qualify for a jumbo loan in Washington.
What is the jumbo loan limit in Washington?
In 2023, the conforming loan limit for a single-family home in most U.S. markets is $726,200. However, this limit can be higher in areas where the median home price is significantly above the national average, such as in Seattle. In Washington, the jumbo loan limit varies between counties.
- $726,200 is the conforming loan limit in most Washington counties
- $977,500 is the maximum limit in Washington’s more expensive counties
Keep in mind that the loan amount is what determines whether or not you’ll need a jumbo loan, not the price of the home you’re buying. So, if you were to put $50,000 down on a $750,000 home in Clark County, the loan would be $700,000, which is under the CLL for this area. In this case, your loan wouldn’t be considered a jumbo loan.
The following counties in Washington have a conforming loan limit beyond $726,200 for 2023:
| County | FHFA Conforming Loan Limit |
| King County | $977,500 |
| Pierce County | $977,500 |
| Snohomish County | $977,500 |
Additional information regarding the conforming loan limits in Washington can be found here.
What are the requirements for a jumbo loan in Washington?
As previously mentioned, the requirements for a jumbo loan are much more stringent than a conforming loan. The specific requirements may vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan in Washington state.
Higher credit score: When it comes to receiving a jumbo loan, credit score requirements are typically more stringent than for conventional mortgages. While some lenders may accept a lower score, a credit score of at least 720 is generally required to qualify for a jumbo loan. It’s important to have a strong credit profile and a solid financial history to increase your chances of being approved for a jumbo mortgage.
Larger down payment: Jumbo loans are a popular financing option for buyers purchasing high-end, expensive properties. However, compared to conventional loans, jumbo loans typically require a larger down payment. The exact amount required will vary depending on the lender and the borrower’s finances, but down payment requirements for jumbo loans can be as high as 20%, sometimes 30%. It’s worth noting that putting down a larger sum upfront can often help borrowers secure a better interest rate on their jumbo loan.
More assets: To qualify for a jumbo loan in Washington, lenders require borrowers to demonstrate that they have sufficient liquid assets or savings to cover at least one year of loan payments. The exact amount of assets needed can vary depending on the lender and the size of the loan, but having more assets can increase the chances of approval and potentially lead to better terms and interest rates.
Lower debt-to-income ratio (DTI): Mortgage lenders typically look for a debt-to-income (DTI) ratio of no higher than 43%, and ideally closer to 36%. The DTI is calculated by dividing the sum of all monthly debt payments by the borrower’s gross monthly income. This requirement ensures that borrowers have a strong ability to repay their loan and manage their debt.
Additional home appraisals: For a jumbo loan, a mortgage lender may require an additional home appraisal as a second opinion, especially if the property is located in an area with few comparable sales. This is to ensure that the home is worth the loan amount or more and to mitigate the lender’s risk. The cost of the appraisal may also be higher in cities with limited property sales.
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