Loan Types
If you're buying a higher-priced home, you may find that a standard mortgage isn't enough to cover it. That's where jumbo loans come in. They work differently from conventional mortgages, come with stricter requirements, and carry their own set of advantages and trade-offs. Here's everything you need to know.
Quick answer: A jumbo mortgage is any home loan that exceeds the conforming loan limit set by the Federal Housing Finance Agency — $766,550 in most areas for 2025, and up to $1,149,825 in high-cost markets. If your loan amount is above that threshold, you need a jumbo loan.
Every year the FHFA sets a conforming loan limit — the maximum loan size that Fannie Mae and Freddie Mac will purchase from lenders. Loans within this limit are called "conforming loans" and carry less risk for lenders because they can be sold to the secondary market.
When your loan exceeds that limit, Fannie and Freddie won't buy it. The lender has to keep it on their own books — which means they take on more risk. To offset that risk, lenders impose stricter qualification requirements and sometimes charge slightly higher rates.
| Area Type | 1-Unit Property | 2-Unit Property | 3-Unit Property |
|---|---|---|---|
| Most of the US | $766,550 | $981,500 | $1,186,350 |
| High-cost areas | $1,149,825 | $1,472,250 | $1,779,525 |
High-cost areas include markets like San Francisco, Los Angeles, New York City, Seattle, and parts of Hawaii and Alaska where home prices are significantly above the national average. If you're buying in one of these markets, your conforming limit is higher before a jumbo loan kicks in.
| Conventional | Jumbo | |
|---|---|---|
| Loan limit | Up to $766,550 | Above $766,550 |
| Down payment | 3–20% | Typically 10–20% |
| Credit score minimum | 620 | 700–720 typically, 740+ preferred |
| DTI maximum | 43–45% | 36–43% — stricter |
| Cash reserves required | 2 months typical | 6–12 months typical |
| PMI required | Yes, if <20% down | Rarely — most require 20%+ |
| Interest rate | Standard market rate | Slightly higher, sometimes lower |
| Sold to Fannie/Freddie | Yes | No — lender keeps it |
Strong credit score. Most jumbo lenders want a minimum of 700–720, and the best rates go to borrowers at 740 or above. Some lenders for very large loans (over $2 million) want 760+. This is notably stricter than the 620 minimum for conventional loans.
Larger down payment. Most jumbo lenders require at least 10–20% down. Some programs allow 10% down but may require private mortgage insurance. The standard for jumbo is 20% down to avoid additional costs.
Lower debt-to-income ratio. Jumbo lenders typically cap DTI at 36–43%, compared to the 45% sometimes allowed on conventional loans. With a larger loan balance, lenders want to see that your existing debts are minimal.
Significant cash reserves. This one surprises many buyers. Jumbo lenders often require 6–12 months of mortgage payments sitting in liquid accounts — checking, savings, or investment accounts — after closing. On a $5,000/month payment that could mean $30,000–$60,000 in reserves beyond your down payment.
Full income documentation. Self-employed buyers face extra scrutiny on jumbo loans. Expect to provide 2 years of tax returns, business financials, and potentially bank statements. W-2 borrowers need pay stubs and employment verification.
Historically jumbo rates ran 0.25–0.50% higher than conforming rates. That's shifted in recent years — in some market conditions jumbo rates have actually been equal to or slightly below conforming rates. This happens when there's strong demand among wealthy buyers and banks competing aggressively for large loan business.
The rate you receive depends heavily on your credit score, down payment, and which lender you use. Shopping multiple lenders is even more important on a jumbo loan because the rate variation between lenders tends to be wider than on conforming loans.
Example: On a $1,000,000 jumbo loan at 7.00% vs 6.75%, the difference is $166/month — or nearly $60,000 over 30 years. Shopping 3-4 lenders on a jumbo loan is worth thousands.
| Pros | Cons |
|---|---|
| Allows purchase of higher-value homes | Stricter qualification requirements |
| No loan amount ceiling | Larger down payment typically required |
| PMI often not required | Larger cash reserve requirements |
| Competitive rates in strong markets | Less lender options than conventional |
| Can be used for primary, second homes | More documentation required |
If your purchase price requires a loan above $766,550 in most markets, a jumbo loan is simply your only option. The real question is whether you meet the qualification requirements and have shopped enough lenders to get a competitive rate.
If you're on the fence — say your purchase price could work with either a conforming loan and a larger down payment, or a smaller down payment with a jumbo — run the numbers both ways. Sometimes putting more money down to stay under the conforming limit gets you a better rate and easier qualification.
Our free calculator works for any loan amount — plug in your jumbo loan figures to see your monthly payment, total interest, and full amortization schedule.
Open the Calculator →This article is for educational purposes only and does not constitute financial or mortgage advice. Loan limits and requirements change annually and vary by lender. Consult a licensed mortgage professional for guidance specific to your situation.