Understanding Jumbo Loans
A jumbo loan is a mortgage that exceeds the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In 2024, the standard conforming limit is $766,550 for most of the US, with higher limits (up to $1,149,825) in designated high-cost areas.
Loans above the conforming limit cannot be purchased by Fannie Mae or Freddie Mac, which means lenders take on more risk. As a result, jumbo loans typically have stricter requirements: higher credit scores (usually 700+), larger down payments (often 10-20%), more cash reserves, and lower debt-to-income ratios.
Jumbo loan interest rates used to be significantly higher than conforming rates, but the gap has narrowed considerably. In many cases, jumbo rates are within 0.25% of conforming rates, and sometimes even lower due to competition among lenders for high-value borrowers.
If you are close to the conforming limit, consider increasing your down payment to bring the loan below the limit. This avoids jumbo loan requirements and may qualify you for better terms.
Frequently Asked Questions
What is the current conforming loan limit?
The 2024 conforming loan limit is $766,550 for single-family homes in most areas of the US. High-cost areas (like parts of California, New York, and Hawaii) have limits up to $1,149,825. The FHFA adjusts these limits annually based on home price changes.
Do jumbo loans have higher interest rates?
Historically yes, but the gap has narrowed significantly. Jumbo rates are typically within 0.25% of conforming rates, and some lenders offer competitive or even lower jumbo rates to attract high-value borrowers. Shop multiple lenders to compare.
What credit score do I need for a jumbo loan?
Most lenders require a minimum credit score of 700 for jumbo loans, with some requiring 720 or higher. The higher the credit score, the better the rate you can qualify for. Some portfolio lenders may have different requirements.
What is the typical down payment for a jumbo loan?
Jumbo loans typically require 10% to 20% down, though some lenders offer jumbo loans with as little as 5% down for strong borrowers. A larger down payment (20%+) avoids PMI and often qualifies you for a better rate.
Can I get a jumbo loan with an ARM?
Yes, jumbo ARMs are available and often have even lower initial rates than jumbo fixed-rate mortgages. A jumbo ARM can be a good choice if you plan to sell or refinance within the ARM's fixed-rate period.