What is a jumbo mortgage?
Quick insights
- Jumbo mortgages finance homes above the Federal Housing Finance Agency (FHFA) limits.
- The loan amounts are higher than conforming loan limits and tend to come with stricter requirements and higher costs due to additional risk factors for the lender.
- Choosing between jumbo and conforming loans may depend on the home price, down payment and qualifications.
When we talk about home loans, two key terms are “conforming loans” and “non-conforming loans.” Conforming loans are equal to or less than the financing limit set by the Federal Housing Finance Agency (FHFA)Opens overlay. Non-conforming loan amounts are above that limit.
Jumbo loan definition
Jumbo mortgages are non-conforming loans used to finance more expensive homes. These loans are higher than the conforming limit set by the FHFA, currently $832,750 in most areas, hence the term “jumbo.”
Jumbo loans cannot be purchased or guaranteed by Fannie Mae or Freddie Mac. Therefore, they are considered “non-conforming” and carry higher risk for lenders and different requirements for borrowers. This means they can be harder to be approved for than conforming mortgages. Typically, lenders only consider borrowers with a good credit rating, income and cash reserves.
How does a jumbo loan work?
Here’s a look at some key characteristics of jumbo mortgage loans.
Loan limits and scale
The primary characteristic of a jumbo loan is its size. Each year, the FHFA sets conforming loan limits based on average home prices. If your loan amount exceeds this limit—which typically varies by county—it is classified as a jumbo loan. In high-cost areas, the threshold may be significantly higher than the national baseline.
Qualification requirements
Jumbo loans involve larger sums of money and higher risk for the lender. So, the qualification standards are generally stricter than those for standard mortgages.
The exact requirements vary by lender, but some requirements you can expect include:
- Credit score: Lenders may want borrowers to have a credit score of 680 or higher.
- Debt-to-income ratio (DTI): How much do you owe compared to how much you make? Lenders may look for a debt-to-income ratio of around 43%.
- Cash reserves: In most cases, for a jumbo loan, you’ll need to show that you have some sort of savings or reserves. The target amount would be to cover a minimum of 6–12 months of payments.
- Loan-to-value (LTV) ratio: To calculate your LTV ratio, divide your loan by the total appraised value or purchase price of the property, whichever is lower.
- Down payment: The more you can put down, the lower your LTV ratio, which shows lenders you have the means to pay for the loan.
Down payment expectations
A 20% down payment may be thought of as a standard for jumbo loans; however, lender requirements vary and could include options as low as 10% or 15% for highly qualified borrowers. Additionally, a larger down payment may help you secure a more competitive interest rate and avoid private mortgage insurance (PMI).
Interest rates and costs
Interest rates on jumbo loans can be highly competitive and vary from conforming loan rates. There are some additional costs to consider:
- Closing costs: Expect higher closing costs due to the larger loan amount and the potential need for multiple appraisals to verify the value of a high-end property.
- Appraisals: Lenders may require two independent appraisals to mitigate the risk associated with a high-value asset.
Conforming loan guidelines
When lenders issue loans, they’re making an investment. But how does your loan turn into a bank’s investment? Lenders often bundle individual loans to sell on the secondary market. Selling loans allows lenders to earn more interest and keep cash flowing.
When Fannie Mae and Freddie Mac purchase loans, they provide:
- Cash flow for lenders to continue providing loans.
- Stability in interest rates for loans.
- Affordability for borrowers due to stable interest rates and lender liquidity.
Not all loans fall under FHFA guidelines. For a loan to be conforming, a buyer’s credit rating, DTI, LTV ratio and income history must meet Fannie Mae or Freddie Mac criteria. Loan limits are also considered when figuring out whether or not a loan will be conforming. Jumbo loans aren’t the only type of non-conforming loan, but they are one of the most common.
Conforming loan limits are set by counties. Most counties fall under the typical limits. However, the limits are higher in certain real estate markets (e.g., Hawaii or Los Angeles).
Current U.S. conforming loan limits
The 2026 conforming loan limit value for one-unit properties is $832,750, an increase of $26,250 from 2025. The new ceiling loan limit for such properties is $1,249,125 (150% of $832,750). There are different loan limits for Alaska, Hawaii, Guam and the U.S. Virgin Islands.
Who needs a jumbo mortgage?
Homebuyers interested in purchasing a house above the conforming loan limit for the area could benefit from a jumbo loan. It’s possible to avoid taking out a jumbo loan by increasing your down payment and lowering the loan amount. This can also be a strategy for homebuyers who want to offset a low credit score or other qualifying requirements.
Getting a jumbo loan is harder than a traditional mortgage, and you’ll want to talk to your lender for more information. To find out if you may need a jumbo mortgage, review Fannie Mae's loan limit guidelinesOpens overlay.
Pros and cons of jumbo loans
What are the benefits of a jumbo mortgage?
- Higher loan amounts: Without jumbo loans, most borrowers wouldn't have a way to purchase more expensive homes.
- Plenty of options: Jumbo loans are available as fixed-rate or adjustable-rate mortgages. In addition, jumbo mortgages come in a variety of terms that vary by lending institution.
- Potentially lower interest rates: Depending on market conditions, your jumbo loan may have a lower interest rate than traditional loans.
Are there any disadvantages of a jumbo loan?
- Higher monthly payments: If you're interested in keeping your monthly payments low, jumbo loans may not be a good fit. In many cases, the lender will tack on higher processing fees and may require more than one appraisal. If you roll these closing costs into your loan, you’re going to see an even higher monthly payment.
- Larger risk burden: The risk of jumbo mortgages doesn't fall on the lender alone. If you lose your job or are otherwise unable to pay, your higher payment might be more difficult to recover from.
- Higher qualification guidelines: The higher credit ratings and other requirements may make it more difficult to qualify for a loan. If you can’t meet these requirements, a jumbo loan may not be right for you.
Jumbo vs. conforming mortgage
Deciding between jumbo mortgages and conforming mortgages often comes down to cost. If you want to take a loan out above the conforming loan limits, you may need a jumbo loan. However, reducing your loan with a larger down payment could make a conforming loan an option.
Here are some of the main differences:
- Jumbo loans generally have higher closing costs, stricter approval criteria and higher monthly payments because of the loan size.
- Both jumbo and conforming loans come in a variety of terms and interest structures.
- Mortgage terms can vary greatly between lending institutions.
To find out what your monthly payment might be, try adjusting some of your numbers in an online mortgage calculator. If you already know that a jumbo loan suits your situation, you can apply for a jumbo loan today.
In summary
A jumbo mortgage loan is a type of financing typically used for high-value properties. The loan amount exceeds the conforming loan limits set by the FHFA and may change each year. Because jumbo loans cannot be purchased or guaranteed by Fannie Mae or Freddie Mac, they represent a greater risk for lenders and often carry more rigorous qualification requirements. Borrowers generally need a high credit score, a low DTI and a substantial down payment to secure approval. While interest rates are competitive, they can vary significantly from standard mortgages based on market conditions and the individual borrower's financial profile.
If you aren’t sure if a jumbo loan is right for you or want to discuss your mortgage options, consider contacting a Chase Home Lending Advisor.
