What Are Jumbo Loans?

A jumbo loan is a mortgage that exceeds the conforming loan limit for a designated county within the United States. The Federal Housing Finance Agency (FHFA) sets conforming loan limits every year, which means that what was considered a jumbo loan this year, may not be considered a jumbo loan next year.

Jumbo loans are considered non-conforming, since they can’t be insured by Fannie Mae and Freddie Mac. By guaranteeing conforming loans, Fannie Mae and Freddie Mac allow lenders to continue issuing and refinancing mortgages at affordable rates. Since jumbo loans are not guaranteed, they’re riskier for lenders to issue — meaning borrowers must meet specific lending requirements.

What is considered a jumbo loan?

A jumbo loan is a mortgage that exceeds the maximum loan limit to be considered a conforming loan. As of 2025, a mortgage of $806,500 or greater is considered a jumbo loan in most areas throughout the country. In more expensive areas, the conforming loan limit caps at $1,209,750 for single-family homes — meaning any single-unit home over that amount would require a jumbo loan.

How does a jumbo loan work?

Jumbo loans work similarly to conforming loans. Borrowers typically have the same options regarding loan terms, payment schedules, and fixed versus variable rates. However, jumbo loans are often more expensive and harder to find than conforming loans. Not all lenders offer jumbo loans, and the ones that do often charge higher interest rates to offset the increased risk.

Jumbo loan requirements

Jumbo loan borrowers usually have to meet stricter qualification criteria than traditional borrowers. Lenders typically require high credit scores, low debt-to-income (DTI) ratios, and strong income or assets. 

Down payment

Many jumbo loan lenders require a down payment of at least 20%, but some may go as high as 30%. If you’re taking out a jumbo loan for $1 million, you might need a down payment as high as $200,000. Depending on the lender and your financial standing, you might qualify for a jumbo loan with a down payment as low as 10%. 

Credit score

Jumbo loan lenders also require borrowers to have an above-average credit score. Some lenders ask for a minimum FICO score of 720, while others might accept scores as low as 700. 

Debt-to-income ratio (DTI)

Most jumbo loan lenders prefer borrowers with DTI ratios less than 43% after issuing the loan. This means that your DTI ratio should be well below 43% before applying for a jumbo loan. You can lower your DTI ratio by paying off large debts, increasing your monthly income, or both. 

Cash reserves

Given the increased risk of issuing a jumbo loan, lenders often require borrowers to have significant cash reserves. Cash reserves are liquid assets that you can use to cover mortgage payments in case of an emergency. Most jumbo loan lenders require at least 6 months’ worth of monthly mortgage payments, while others might require up to 18 months’ worth of cash reserves. 

Jumbo loan rates

Although the interest rate on a jumbo loan is usually higher than the interest rate on a conforming loan, you can still shop around for competitive rates. Borrowers with high credit scores, low DTI ratios, and strong cash reserves have a better chance of getting a lower rate. Consider pulling all three credit reports from Equifax, Experian, and TransUnion to get the most accurate score and dispute any errors you find. 

Pros and cons of jumbo loans

Whether you need a jumbo loan depends on the conforming loan limit in your county and the property’s listing price. If you’re on the fence about financing your dream home with a jumbo loan, weigh out the pros and cons before applying.

Pros

Higher loan amounts: Getting a jumbo loan might be the only way you can afford a home priced above the conforming loan limit in your areas. Although you could potentially obtain two mortgages, taking out a single mortgage for a larger amount is less expensive and easier to manage. 

Many loan options: Jumbo loans aren’t limited to specific loan terms or rates. Borrowers can shop around for different types of jumbo loans, including VA and FHA jumbo loans. You can also get a jumbo loan at a fixed or adjustable rate. 

Potentially lower interest rates: Although jumbo loan rates are normally higher than conforming loan rates, the market for jumbo loans is smaller. Depending on how many jumbo loan applications they receive, jumbo loan lenders might be willing to compete on rates to win over certain borrowers. 

Cons

Larger down payments: Unlike many other mortgage loans, a reduced down payment on a jumbo loan is rarely an option. Conforming FHA, VA, and USDA loans often come with down payments as low as 3.5%. In some cases, you might even qualify for a 0% down payment. That’s not the case with jumbo loans.

Higher closing costs and fees: Closing costs and lending fees are often calculated as a percentage of your overall loan amount, which means that jumbo loans come with higher closing costs and fees. 

Fewer tax breaks: Mortgage interest deductions are currently capped at $750,000 for home purchased after 2017. This means that jumbo loan borrowers might not get as many tax breaks as borrowers with smaller mortgages. If you borrowed $1.5 million, you’d only be able to deduct interest on half of the loan.

Why would someone want a jumbo loan?

The main reason someone would want a jumbo loan is to be able to afford a more expensive home. If you find a house that costs more than the conforming loan limit assigned to that county, you’ll either need to take out a jumbo loan, take out two mortgages, or find another home. 

If the seller is willing to negotiate, you might be able to bring the sales price down below the conforming loan limit. However, the chances of a seller reducing the price on a home that is priced well above the conforming loan limit are slim, especially if the home has no major property damage. 

Final thoughts on jumbo loans

Jumbo loans make sense for borrowers with high incomes, high credit scores, and low DTI ratios who have their eyes set on a more expensive home. Although you can expect to pay higher interest rates on a jumbo loan than on a conforming loan, you should still shop around for the best rate and terms. 
Consider whether a 15-year or 30-year jumbo loan makes sense for you, as well as whether you can manage a variable interest rate in the long-run. You should also carefully assess how much disposable income you’ll have after paying the higher monthly mortgage payments that come with a jumbo loan to make sure you don’t end up house rich, but cash poor. Find a mortgage lender near you who specializes in jumbo loans to learn more about the program and check if you pre-qualify.