Overview

Jumbo loans and conforming mortgages are two ways lenders package home financing. Conforming mortgages meet FHFA-set county limits and underwriting guidelines that allow Fannie Mae or Freddie Mac to buy them. Jumbo loans exceed those limits and are underwritten and priced by private lenders without GSE guarantees (FHFA).

How they differ (at a glance)

  • Loan size: Conforming loans stay at or below the FHFA county limit; jumbo loans exceed it. FHFA sets limits yearly and they vary by county—check FHFA.gov for the current figures.
  • Underwriting: Jumbos usually require stronger documentation, higher credit scores, and more cash reserves. Conforming loans follow the GSEs’ automated underwriting rules more closely.
  • Pricing: Conforming loans often carry lower rates and smaller lender fees; jumbo pricing depends on lender risk appetite and market conditions.

When you need a jumbo loan

You need a jumbo loan when the home price requires financing above your county’s conforming loan limit or when your financing goals (e.g., unique property, large portfolio purchase) won’t fit GSE eligibility. Examples:

  • Buying a $1.2M single-family home in a county with a $700k conforming limit.
  • Purchasing a high-value property with unique collateral that GSEs won’t buy.

Qualification checklist (typical expectations)

  • Credit score: Conforming — 620+ for many conventional products; Jumbo — frequently 700+ (varies by lender).
  • Down payment: Conforming — as low as 3% for some programs; Jumbo — commonly 20%+ (some lenders offer lower LTVs with stronger credit).
  • Debt-to-income (DTI): Strict on both; lenders often look for DTI under 43% (some jumbo programs are stricter).
  • Cash reserves: Jumbos often require several months’ mortgage payments in reserves, especially for investment properties or multiple financed homes.
  • Documentation: Full income verification and asset documentation are standard; bank statement or stated-income programs are rare for jumbos.

Practical examples and lender strategy

In my work advising high-net-worth and middle-income buyers in expensive coastal markets, I’ve seen two common paths:

  • Move to a jumbo: Buyers whose target home exceeds local conforming limits typically accept slightly higher costs for the flexibility of a jumbo loan.
  • Reconfigure the purchase: Some buyers reduce loan size (larger down payment), split financing (second lien), or shop different neighborhoods to stay within conforming limits.

Costs and rates: expect variation

Jumbo rates can be close to conforming rates in competitive markets, but lenders apply overlays — additional criteria that raise cost or tighten requirements. Obtain multiple quotes and ask for a loan-level price adjustment breakdown.

Common mistakes borrowers make

  • Assuming a jumbo always means prohibitively higher rates — rate spreads have narrowed in many cycles.
  • Overlooking reserves — lenders often require stronger cash buffers for jumbos.
  • Not checking county conforming limits — FHFA updates limits annually and limits differ by county.

When to prefer a conforming mortgage

  • Your purchase stays under the FHFA limit and you want lower upfront costs and easier qualification.
  • You plan to use specific GSE-backed products (e.g., HomeReady, Home Possible) that lower down payment requirements.

Further reading and internal resources

Authoritative sources

Professional tips

  • Get prequalified with multiple lenders to compare rate and reserve requirements.
  • Ask about lender overlays, required reserves, and whether the quote includes mortgage insurance or a portfolio pricing premium.
  • If you’re near the conforming limit, model scenarios that include a larger down payment and the cost of private or second-lien financing.

FAQ (short)

  • Can you refinance a jumbo? Yes — most lenders offer jumbo refinances, and terms can improve as credit or equity increases.
  • Is PMI available for jumbos? Private mortgage insurance is less common for true jumbos; some lenders use second liens or higher rates instead.

Disclaimer

This entry is educational and not personalized financial advice. Consult a licensed mortgage professional for recommendations tailored to your circumstances.