Jumbo vs Conventional Loan: How They Compare

Conventional loans are mortgages that conform to the loan limits set by the Federal Housing Finance Agency (FHFA). A jumbo loan is a type of conventional loan available to those who need to borrow more than the conforming loan limit, such as a high-end property or a home in an area with an expensive market. As of November 26, 2024, to buy a one-unit property with conventional loan that costs more than $806,500 in a lower cost area or $1,209,750 in a higher-cost area, you’ll need to qualify for a jumbo loan or put down a larger down payment to reduce your borrowing amount.

Jumbo vs conventional loan requirements

While a jumbo loan is considered conventional, the standard Fannie Mae and Freddie Mac requirements to qualify for a jumbo loan are different from those of conforming conventional loans. You typically need a higher credit score, down payment and cash reserves to qualify for a jumbo loan, in addition to having a lower loan-to-value (LTV) and debt-to-income (DTI) ratio. Lenders can also set their own borrower requirements to reduce their lending risk and ensure you’re not borrowing more than you can afford.

Here’s an overview of the primary conventional loan requirements for conforming conventional loans and non-conforming, jumbo loans:

Jumbo vs conventional loan rates

Jumbo loans are often thought to have higher mortgage rates than traditional conventional loans due to the size of the loan elevating the risk to the lender, but this isn’t always true. Lenders determine mortgage rates based on the borrower’s financial factors and the current housing market. When deciding between a jumbo and conventional loan, you’ll also have the option of choosing a fixed-rate or adjustable-rate mortgage, which may impact the rates you qualify for.

Whether you’re interested in a traditional conventional loan or a jumbo loan, your rates will come down to the following factors:

• Credit score and history
• Income history
• The amount of debt you have compared to your income
• Your down payment amount

Using Zillow’s mortgage rate comparison tool, you can view and compare current rates among different lenders. 

When to consider a jumbo loan vs a conventional loan

In 2023, the Home Mortgage Disclosure Act reported that 69% of homebuyers used a conventional, conforming loan to purchase a primary home. While conforming loans are more common than jumbo loans, there are instances where it may make sense to choose a jumbo loan over a traditional conventional loan. For example, if you’re purchasing a property that exceeds the local conforming loan limits or buying in a high-cost area. Sometimes borrowers will purchase a home with a jumbo loan, and then refinance into a conforming loan later on as their loan balance gets smaller and the conforming loan limits increase.

Consider a jumbo loan if:

• You plan to finance a property that exceed the conforming loan limit for your area
• You have at least 12 months of cash reserved
• You can put down 10% on the property
• Your debts make up less than 43% of your income (Check your DTI ratio)

Consider a conforming loan if:

• You’re a low-to-moderate-income earner
• You’re purchasing a home priced below the local conforming loan limit
• You can put down at least 3% to 5% (depending on your qualifications)
• Your debts make up less than 50% of your income (Check your DTI ratio).

Whether you’re interested in a jumbo or a traditional conventional loan, checking how much you're eligible to borrow is a great first step toward getting a mortgage. Check if you pre-qualify for a mortgage with us at Zillow Home Loans — it’s quick, easy, and won’t affect your credit score.*

*An equal housing lender. NMLS #10287