Jumbo Loans

Jumbo loans are conventional mortgages designed for higher-priced homes when the loan amount exceeds the annual conforming limits set by the Federal Housing Finance Agency. Because they’re above standard limits and not eligible for purchase by Fannie Mae or Freddie Mac, jumbo loans are typically underwritten with stronger qualification requirements—but they can offer excellent options for well-qualified borrowers.

Why borrowers choose jumbo financing

Jumbo loans are a great fit when you need more purchasing power and want:

• Higher loan amounts for expensive markets

• Flexible terms (fixed or adjustable options)

• Potentially competitive rates for strong borrowers

• Options for primary residences, and sometimes second homes or investment properties (guidelines vary)

Common jumbo loan options

1) Jumbo fixed-rate mortgages

Your interest rate stays the same for the entire loan term.

• Best for: long-term stability and predictable payments

• Common terms: 30-year fixed, 15-year fixed

2) Jumbo adjustable-rate mortgages (ARMs)

Often start with a lower introductory rate for a set period, then adjust.

• Best for: borrowers who may sell, refinance, or pay down the balance before the adjustment period

• Common structures: 5/6, 7/6, 10/6 ARMs (fixed for 5/7/10 years, then adjusts every 6 months)

3) Jumbo purchase vs. jumbo refinance

• Purchase: finance a higher-priced home within jumbo guidelines

• Rate-and-term refinance: potentially lower rate or change term

• Cash-out refinance: access equity (available in some cases; limits and rules apply)

What jumbo lenders typically look for

Jumbo guidelines vary by lender, but these factors matter most:

Credit strength

• Higher credit scores are commonly expected

• Strong payment history helps pricing and approval

Income and documentation

• Stable, documentable income is key

• Self-employed borrowers may need additional documentation and business review

Debt-to-income (DTI)

• Lower DTI generally improves approval odds and pricing

• Large monthly obligations can limit approval amount

Down payment and equity

• Down payment requirements often increase with loan size and property type

• Larger down payments can improve rate options and reduce risk

Cash reserves (assets after closing)

Many jumbo lenders want to see reserves—extra funds available after closing (often measured in months of payments). Reserve requirements can be higher for:

• Multi-unit properties

• Second homes and investment properties

• Very large loan amounts

Costs to expect with a jumbo loan

Jumbo loan costs can include:

• Interest rate & APR

• Lender fees (varies by lender)

• Third-party costs (appraisal, escrow/title, credit report)

• Prepaids (taxes, insurance, interest)

• Sometimes additional appraisal requirements for high-value properties

Tip: Jumbo pricing can be sensitive to credit score, down payment, reserves, and property type—so structuring the loan well can make a meaningful difference.

Jumbo Loans vs. Conforming Loans

Jumbo loans:

• Exceed conforming loan limits

• Underwriting is often more conservative

• Can be ideal for higher-priced homes

Conforming loans:

• Stay within annual limits

• Usually have broader program availability

• Often allow lower down payments (depending on scenario)

If you’re near the limit, sometimes a small change in down payment or loan structure can move you from jumbo to conforming.

The jumbo loan process

1. Pre-approval – review income, assets, and credit

2. Choose loan strategy – fixed vs. ARM; down payment and reserve plan

3. Submit documentation – income, bank statements, and required disclosures

4. Appraisal & underwriting – confirm value and guideline fit

5. Clear conditions – satisfy final underwriting requests

6. Close – sign, fund, and move forward confidently

FAQs

Do jumbo loans always require 20% down?
Not always. Some borrowers qualify with less, but requirements depend on loan size, credit, property type, and reserves.

Are jumbo rates higher than conforming rates?
Sometimes, but not always—well-qualified jumbo borrowers can see very competitive pricing.

Can I get a jumbo loan for a second home or investment property?
Often yes, but expect stricter requirements (down payment, reserves, pricing).

Is jumbo the same as non-QM?
No. Jumbo is still a conventional loan category based on loan size. Non-QM refers to alternative qualification methods outside typical agency guidelines.