What is a jumbo loan?

Key takeaways 

• Jumbo loans allow buyers to finance homes above local conforming limits, which is often necessary in high‑cost markets, but they can’t be sold to Fannie Mae or Freddie Mac, leaving lenders to shoulder more risk.
• More added risk leads to tougher qualification standards, including higher credit‑score expectations, lower debt‑to‑income ratios, larger down payments and significant cash reserves.
• Rates on jumbo loans can be competitive with conforming mortgages, but borrowing costs ultimately depend on the lender and the borrower’s overall financial profile, making comparison shopping essential.

Jumbo loans, also known as non‑conforming mortgages, are designed for buyers financing homes that exceed lending caps set by the Federal Housing Finance Agency. Because these loans are above the government’s limits, they cannot be guaranteed by Fannie Mae or Freddie Mac, which are regulated by the Federal Housing Finance Agency.

As a result, lenders take on more risk when issuing these mortgages, since they are not protected if a borrower defaults. For buyers, that typically translates into tougher qualification standards, including larger down payments and higher credit score requirements than those tied to conventional loans.

In the U.S., Fannie Mae and Freddie Mac buy mortgages from private lenders, helping support liquidity and stability in the housing market. But the government agencies only purchase loans that meet specific criteria, including size limits set each year by the FHFA.

Those limits vary by county. In most markets, the maximum conforming loan size in 2025 was $806,500. In the country’s priciest regions, including New York City, Washington, D.C., Hawaii and parts of California, the maximum loan amount is $1,209,750.

Mortgages above those thresholds fall outside the agencies’ guidelines, making them non‑conforming loans that lenders must hold on their own balance sheets.

Buyers who borrow more than their local conforming loan limit typically need jumbo financing to complete a purchase.

“Exceeding this loan limit is common in expensive cities or for luxury properties like multimillion-dollar homes, high-end condos or large estates,” said Jim Breeze, senior vice president of Mortgage Product Development at PNC Bank.

Jumbo loans are often used where home values are similar to or exceed an area’s conforming loan limits. The San Francisco Bay area is one example. The median home price was $1.285 million in February 2026, according to the California Association of Realtors, while the region’s conforming loan limit is $1,249,125. Mortgages that exceed that threshold typically require jumbo financing.

For lenders, jumbo mortgages are riskier than conforming loans. There’s more money involved, and since jumbo loans aren’t backed by Fannie Mae or Freddie Mac, the lender could face financial loss if the borrower defaults.

This makes the qualification criteria for a jumbo loan stricter than for a conforming conventional home loan. Here are some of the key differences: 

Your credit score is one of the most important factors lenders will consider when reviewing your application for a jumbo loan. “The qualification criteria for jumbo loans vary from lender to lender, but it is common for jumbo loans to require a higher credit score than a conforming loan,” said Kendall Meade, certified financial planner at SoFi.

In many cases, borrowers need scores of at least 700, compared with the 620 minimum often allowed for conforming mortgages.

Lenders also want to understand how much of your income will go toward debt each month. They will review your debt-to-income (DTI) ratio to assess whether you can comfortably take on more debt with a jumbo loan. 

“Typically, the maximum DTI would be 43%, but the lower, the better in terms of qualification and the best rates,” says Meade.

While some conforming loans allow down payments as low as 3%, jumbo loans generally require more upfront. “Down payments can start at 10%, but this depends on the borrower’s financial situation,” said Breeze. Borrowers with weaker credit profiles may be required to put down 20% or more.

A larger down payment can also help you reduce your loan-to-value, or LTV, ratio and secure a lower interest rate.

Borrowers also need to show they can withstand financial setbacks. Many lenders require at least six months of mortgage payments set aside in reserve. “It’s preferred for borrowers to have enough to cover up to a year of mortgage payments,” said Breeze.

Jumbo loans can carry higher interest rates than conforming mortgages, but they’re often competitive.

The average contract rate on a 30‑year fixed‑rate mortgage for jumbo balances — those above $832,750 — fell to 6.48% for the week ending April 10 from 6.54%, according to the Mortgage Bankers Association.

Interest rates on jumbo loans vary by lender, credit score and overall financial profile. Borrowers with higher credit scores and lower debt‑to‑income ratios typically qualify for the better rates.

Like conventional mortgages, jumbo loans have fixed or adjustable interest rates and various term lengths, including 15- and 30-year terms. Adjustable-rate jumbo mortgages generally have an initial fixed interest period of five to 10 years. After that, the rate typically changes once or twice per year, depending on the loan. 

Some closing costs, including origination fees, are calculated as a percentage of the loan amount. Because jumbo mortgages are larger than conforming loans, they “typically have higher closing costs,” said Meade.

• Financing for pricier homes: Jumbo mortgages allow buyers to borrow more than the conforming loan limit in their area, which may be necessary in high‑cost markets.
• Competitive rates: Jumbo loans can sometimes carry lower interest rates than conforming mortgages. Comparing offers from multiple lenders can help borrowers secure the best deal.
• Flexible terms: Jumbo loans are available in various term lengths, giving borrowers more choice in structuring repayments.

• Stricter eligibility criteria: Jumbo loans are harder to qualify for than conforming mortgages, typically requiring higher credit scores, stronger income, larger down payments and substantial cash reserves.
• Higher upfront costs: Borrowers should be prepared for steeper closing costs and down payments that often range from 10% to 20%. Many lenders also require six to 12 months of cash reserves.

Borrowers also may want to ask their real estate agent about lenders with a strong track record in jumbo financing and review online feedback to gauge the borrowing experience. Comparing rate quotes from at least three lenders can help ensure the most competitive terms.

This story was updated April 16.