Most mortgages fall under a maximum size called the conforming loan limit. When a home purchase requires borrowing more than that limit, you’ll need a jumbo loan — a type of financing with its own rules and requirements.
What Makes a Loan “Jumbo”
A jumbo loan is any mortgage that exceeds the conforming loan limit set for your area. Because these loans aren’t backed by the standard government-sponsored guarantee programs, lenders take on more risk and set their own underwriting standards.
How Jumbo Loans Differ From Conforming Loans
- Larger down payments: Many jumbo lenders require at least 10-20% down, compared to as little as 3% on some conforming loans.
- Stricter credit requirements: Expect to need a higher credit score than you would for a conforming loan.
- Lower debt-to-income thresholds: Lenders are typically more conservative about how much total debt you can carry.
- More documentation: Larger loan amounts often mean more thorough income and asset verification, including larger cash reserve requirements.
Interest Rates on Jumbo Loans
Jumbo loan rates can be higher or lower than conforming rates depending on market conditions and lender competition — there’s no fixed rule. Shopping multiple jumbo lenders is especially important since pricing can vary more than it does for standardized conforming loans.
Who Typically Needs a Jumbo Loan
Buyers in high-cost housing markets, or those purchasing larger or luxury properties, are the most common jumbo loan borrowers. If your target home price is near or above your area’s conforming limit, ask your lender early whether you’ll need a jumbo loan so you can prepare the right documentation.