Financing Your Million Dollar Seattle Home: Jumbo (Non-Conforming) Mortgages

Jumbo mortgages have been slowly returning since the "mortgage meltdown" and the pricing is becoming more competitive as lenders re-enter the non-conforming markets.  Loan amounts that are higher than conforming loan limits have different underwriting guidelines than conforming, typically requiring additional reserves (assets) from the borrower, lower debt-to-income ratios and higher credit scores.  It's not unusual to have underwriting require a second appraisal after reviewing the first one with a fine tooth comb.  Because these loans are not backed by Fannie or Freddie, they tend to be scrutinized more than mortgage with a conforming loan amount.

The higher the loan amount is, the more reserves the borrower is required to have.  One lender I work with requires 6 months reserves for loan amounts of 1 million or less and 12 months reserves if the loan amount is over 1 million.

In the greater Seattle area (King, Snohomish and Pierce Counties), a jumbo loan currently is any residential mortgage with a loan amount higher than $567,500 (click here for a list of loan amounts by county).   If you're eligible for a VA loan, jumbos are a different story.  This post will focus on non-conforming jumbos.

Non-conforming loans have several factors that impact pricing including credit score, loan to value and loan amounts.  Here's a comparison of rates using a 30 year fixed based on current pricing based on home valued at 1.3 million, purchase with credit scores of 740 or higher and taxes and insurance included in the mortgage payment:

Loan amount of $1,000,0000:  5.625% priced w/1 point (APR 5.767)  NOTE: 20% down payment would not work with this scenario as most lenders require 25% down when loan amounts are over 1 million.

Loan amount based on 75% loan to value: $975,000: 5.500% priced w/1 point (APR 5.641).

Loan amount based on 60% loan to value:  $780,000: 5.375% priced w/1 point (APR 5.522).

For reference, I'm quoting 5.00% for a 30 year fixed a high balance conforming ($567,500 - $417,001 loan amount) at an 80% loan to value (apr 5.147).  If the loan to value is 60% or lower, the rate is reduced to 4.875% (apr 5.024). 

Loan amounts from 1.5 – 2 million typically require a down payment of 30%.

NOTE:  Adjustable rate mortgages are available and 30 year fixed with interest only payments (requires more equity and higher credit scores than fully amortized jumbos).  I'm using a 30 year fixed amortized for comparison sake to illustrate the difference in rates based on various down payments.   For your personal rate quote for homes located in Washington state, please contact me.


  1. Do you know if there are non-conforming options for people that are 18 months out of a shortsale?

    • Hi Barbi Jo, I would bet that you’re going to have a tough time finding conventional financing for a jumbo loan being 18 months out of a short sale.

      Conforming guidelines have a 2 year waiting period following the short sale if the home buyer has at least 20% down payment.

      The other factor with a “jumbo” mortgage will be credit scores. Lenders will want to see at least scores of 720 or higher with 4 established trade lines.

      Plan on having plenty of reserves too – I estimate at least six months of the proposed PITI. Retirement funds can count as reserves however lenders will reduce the value to 60% of the ending balance.

      You might want to try a lender who “portfolios” their loans.

      UPDATE: One of the lenders we work with for Jumbo loans states they have a 4 to 7 year waiting period. “If the loan that was paid off was current and there had been no delinquencies on that loan during the past 12 months before being paid off, 4 years (instead of 7 years) must have passed with the re-establishment of acceptable credit.”

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