What Is a Jumbo Loan?
A jumbo loan is a mortgage that exceeds the conforming loan limits set each year by the Federal Housing Finance Agency (FHFA). Because jumbo loans are too large to be purchased by Fannie Mae or Freddie Mac, lenders retain them on their own balance sheets — and as a result, they impose stricter qualification requirements than on conforming loans. Jumbo loans are common in high-cost housing markets where median home prices exceed the conforming limit.
2025 Conforming Loan Limits
The FHFA adjusts conforming loan limits annually based on changes in national home prices. For 2025, the limits are:
- Baseline limit (most of the U.S.): $806,500 for a single-family home
- High-cost area limit: Up to $1,209,750 for designated high-cost counties (such as parts of California, New York, Hawaii, and the Washington D.C. metro area)
Any mortgage that exceeds the applicable limit for your county is considered a jumbo loan. Limits for multi-unit properties (2–4 units) are higher. You can look up your county's specific limit on the FHFA's website.
Jumbo vs. Conforming Loan: Key Differences
| Feature | Conforming Loan | Jumbo Loan |
|---|---|---|
| Loan limit | Up to $806,500 (baseline) | Above $806,500 (or local high-cost limit) |
| Sold to Fannie / Freddie | Yes | No — lender holds the loan |
| Minimum credit score | 620 (conventional) | 720+ typical |
| Minimum down payment | 3% (conventional) | 10%–20% typical |
| Maximum DTI | 45%–50% | 43% or lower |
| PMI required under 20% down | Yes | Varies by lender; often not offered |
| Interest rate vs. conforming | Benchmark | Historically higher; gap varies |
| Cash reserves required | 2–6 months typical | 12+ months common |
To understand PMI on conforming loans, see What Is a Conventional Loan? and use the PMI Calculator to estimate monthly PMI costs.
Why Jumbo Loans Have Stricter Requirements
Conforming loans can be sold to Fannie Mae and Freddie Mac after origination, transferring the default risk off the lender's books. Jumbo loans cannot be sold through those channels, so the originating lender holds the full credit risk for the life of the loan. To compensate for that concentrated risk, lenders require stronger borrower profiles.
There is no government guarantee behind jumbo loans — no FHA insurance, no VA backing, no Fannie or Freddie purchase agreement. Every dollar lent is the lender's own risk. This is why documentation requirements, reserve requirements, and credit standards are all considerably higher than for conforming loans.
Typical Jumbo Loan Requirements
While specific standards vary by lender and loan size, borrowers applying for jumbo loans should generally expect:
- Credit score: 720 or higher is standard; some lenders require 740+ for the best rates or loan sizes above $1.5 million.
- Down payment: Most lenders require at least 10% to 20%, with some requiring more for very large loan amounts.
- Debt-to-income ratio (DTI): Generally 43% or below, with many lenders preferring 38% to 40%.
- Cash reserves: Lenders commonly require 12 months of mortgage payments in liquid assets after closing — well above the 2 to 6 months required for conforming loans.
- Income documentation: Expect full income verification, including two years of tax returns, W-2s, and bank statements. Self-employed borrowers face particularly rigorous review.
- Appraisal: Two independent appraisals are sometimes required for very large loan amounts.
Are Jumbo Rates Higher Than Conforming Rates?
Historically, jumbo mortgage rates carried a premium of 0.25% to 0.50% over conforming loan rates to compensate lenders for the added risk. In recent years, however, that gap has narrowed — and in some market environments, jumbo rates have actually been equal to or lower than conforming rates.
When rates are low and lenders are competing aggressively for wealthy borrowers, jumbo rates can be very competitive. When credit markets are stressed, the spread tends to widen. The best way to assess current jumbo pricing is to get quotes from multiple lenders who actively originate jumbo loans, including large banks, portfolio lenders, and credit unions.
Jumbo Loan vs. Using Two Conforming Loans
One alternative to a single jumbo loan is the piggyback strategy, most commonly structured as an 80/10/10: a first mortgage at 80% of the purchase price (within the conforming limit), a second mortgage (home equity loan or HELOC) at 10%, and a 10% down payment. This can allow you to avoid jumbo qualification requirements entirely while purchasing a home above the conforming limit.
The tradeoffs: the second loan typically carries a higher interest rate than the first, and HELOCs often have variable rates. Whether the 80/10/10 saves money compared to a single jumbo loan depends on the rate spread, your credit profile, and how quickly you'd pay off the second loan. Running the numbers with a mortgage professional is advisable before choosing between the two structures.
Source: FHFA — Conforming Loan Limit values and annual announcements
This definition is for informational purposes only and does not constitute financial advice.