How big of a mortgage can you get in 2021?
Even pandemic lockdowns, chaotic protests, and a presidential election weren’t able to slow down the real estate market over the past year. In fact, the Tacoma property market has only gotten hotter because of it all.
If you are considering refinancing or buying a home in Tacoma, WA this year, you may need an ever bigger loan. So, how much of a home mortgage loan can you hope to get? What are the loan limits for 2021? When may you need a jumbo mortgage loan versus other financing options?
The Tacoma Housing Market
Seattle’s housing market has become so notoriously competitive and pricey that many more people are choosing Tacoma instead this year.
The recent bitcoin crash, concerns over the stock market, and landlords too afraid to lease their properties are all making home buying more competitive than ever. New national home sales records are being set.
This can all make it extra challenging out there for home buyers in Tacoma. It means that you need to know how much you qualify for, and have a reliable mortgage pre-approval in your hand before you head out house shopping. That way you can make a strong offer on a house before the competition, and be confident in your loan approval sticking when it comes to closing your loan.
Being knowledgeable about the financing options available will also help ensure that you aren’t unnecessarily letting opportunities pass you by from the sidelines.
As of the spring 2021 the average Tacoma home price had risen by over 17% to almost $426,000.
While that is a big leap for the local market, it is also around 50% of the cost of buying a home in Seattle.
The longer you wait to buy a home the more expensive it will likely be. Fortunately, if you already own, you probably have a lot of new equity and wealth you may want to cash in on with a refinance. There also appears plenty of room for local house prices to go up too.
Tacoma Home Loan Limits
National conforming loan limits were lifted to $548,250 by the Federal Housing Finance Agency (FHFA) for 2021. That may not be enough for even an average home in Seattle, but it is enough to get yourself a great place in Tacoma.
The FHFA has also expanded these loan limits where high housing costs exceed 115% of the national average. There are three counties in Washington State that qualify for these high loan amounts. In 2021 this includes Snohomish, King and Pierce County, WA. In these three counties the conforming loan limit is raised to $776,250.
These limits apply to conforming loans backed by, and sold onto Freddie Mac and Fannie Mae. This covers the bulk of home mortgage loans offered in the post 2008 financial world.
Conforming loans remain the most common types of traditional home loans. Their advantages include low interest rates, and smaller down payments, which may be as little as 3% to 5% of the home’s purchase price.
Tacoma Jumbo Mortgage Loans
Loan amounts above these conforming loan limits are called ‘Jumbo Mortgages’.
While there is technically no limit on how big of a home mortgage you can get, these loans are different. You’ll want the help of a great Tacoma mortgage broker to guide you into a great fitting jumbo mortgage.
These loans can easily run into the millions of dollars. However, most individual lenders and banks don’t want to take on all of that risk with one loan just by themselves. They will typically source the funds on Wall Street.
How Hard Is It To Get A Jumbo Mortgage Loan In Tacoma?
Because of the amount of money on the line these loans can be seen as riskier for lenders to make.
This means lenders may look more closely at things like:
- Down payment percentages
- Credit scores
- Payment shock
- Cash and liquid assets on hand
- DTI ratios and disposable monthly income
The availability of these larger loans and appetite of lenders to make them changes over time. Sometimes they can be much rarer as lenders look to protect themselves.
As a wealthy high income earner you may be able to afford it, but may find your finances are so complex that it is easier to avoid going over conforming loan limits.
Know Your Options
Maximize Your Borrowing Power
Today’s generous loan limits in Tacoma mean that you can buy an $860,000 home, with a 10% down payment, and still qualify for the best conforming loan rates, and easier underwriting.
Creative Loan Structuring
Are two loans better than one? In some cases you may find the optimal financing solution is a first and second mortgage. For example, an 80% first mortgage loan, and a 10% second mortgage. This keeps your first mortgage loan amount under the conforming loan limits. You avoid PMI, and secure great interest rates. The second loan lowers the cash you need out of pocket.
VA Mortgage Loans
Veterans and active duty service members and their family members may qualify for VA home loans with no loan limits. These mortgages can offer 100% financing, even above and beyond the conforming loan limit.