Jumbo Loan: Definition, Limits, and Requirements

How Do Jumbo Loans Work?

Jumbo loans are similar in many ways to conforming loans, but they are loans for higher amounts so they aren’t eligible for purchase by Fannie Mae and Freddie Mac. 

Since Fannie Mae and Freddie Mac are the primary purchasers of mortgage loans on the secondary mortgage market, lenders often must keep jumbo loans on their books rather than reselling the mortgage. 

Because lenders take more risk by keeping a loan on their books, jumbo loans typically have a higher interest rate and stricter qualifying requirements. 

Jumbo Loan Limits

Across most of the United States, there is a national baseline conforming loan limit. These limits usually change every year, and the limit for 2026 is $832,750 for a single-family property. 

However, in high cost of living areas where the median home value is well above the national norm, the conforming loan limit (CLL) is higher. Specifically, the high-cost ceiling is 150% of the baseline CLL, which is $1,249,125 in 2026. Other parts of the country might have a loan limit lower than this, but higher than $832,750.

Loans that exceed the national baseline or the high-cost ceiling loan limit in the relevant areas are considered jumbo loans. 

Jumbo Loan Requirements

Jumbo loan requirements are usually stricter than those to qualify for a conforming loan, as lenders take more risk when they issue a loan that cannot be resold to Fannie Mae or Freddie Mac. 

Here are some of the typical qualifications that lenders consider. 

• Credit score: Lenders often require higher credit scores for jumbo loans than for other mortgage types. Typically, lenders require credit scores of around 700 or higher, with scores of 740 or above often necessary for the best rates. 
• Debt-to-income ratio (DTI): For jumbo loans, lenders typically accept a maximum debt-to-income ratio of no higher than 45% because they want to ensure you can afford your mortgage payments and other living expenses each month.
• Down payment: Lenders may require a larger down payment to approve a jumbo loan. However, down payment standards vary from lender to lender.
• Home appraisal: The house must be appraised at or near the purchase price, just like other types of mortgages. Some lenders may require two appraisals.
• Cash in the bank: Lenders may want to see larger cash reserves that’ll cover your mortgage payments and living expenses for several months. You’ll also need assets to cover your down payment and closing costs.
• Proof of income: As you would with other mortgages, you'll need to provide income and financial documents that prove you can pay the loan back. This can include tax returns, pay stubs, and bank statements. 
• Property type: Jumbo loans can be used for primary residences, vacation homes, or investment properties. 
• Closing costs: Closing costs may be higher for jumbo loans because you are borrowing a higher amount. While the percentage is typically similar (3% to 6% of the loan amount), the dollar value is higher because of the large loan balance. 

Pros and Cons of Jumbo Loans

There are both pros and cons of jumbo loans to consider, as the table below shows. 

Should You Get a Jumbo Loan?

You may want to consider a jumbo loan if you need to purchase a more expensive home and can comfortably afford the payments.

Be sure to consider the total costs of borrowing, how monthly payments fit into your budget, home values in your area, and the interest rate on jumbo versus conventional rates to confirm this loan is right for you.  

Jumbo Mortgage Loan Alternatives

You may want to explore other options if you don’t need an expensive home, are unlikely to qualify, or want to keep housing costs lower to spend more on other goals. Alternatives to a jumbo mortgage loan include:

• Purchasing a less expensive home
• Using a piggyback loan (taking out multiple loans to stay below the conforming loan limits
• Making a larger down payment to reduce your loan balance below the conforming loan limits. 

Jumbo Loan FAQs

If you still want to learn more, here are the answers to some frequently asked questions about jumbo loans.

Do You Have to Put 20% Down on a Jumbo Loan?

Jumbo loan lenders are more likely to require larger down payments compared with conforming loans lenders. However, many lenders allow you to get a jumbo loan with less than 20% down. You will need to shop around and compare lender requirements to see your options.

How Hard Is It to Get a Jumbo Loan? 

Qualifying for a jumbo loan is more difficult than qualifying for a conforming loan. You may need a higher credit score, a larger down payment, and a higher income. Requirements vary by lender, so shop around to find a loan that you are eligible for given your financial credentials.

How Can You Get a Good Jumbo Loan Rate?

To qualify for a good jumbo loan rate, aim to create the type of financial profile that lenders look for. This means improving your credit score to ideally 740 or higher, making a 20% down payment, keeping your debt-to-income ratio as low as possible, and having several months of cash reserves. 

Final Thoughts: A Jumbo Loan Can Help You Buy in High-Cost Markets

If you live in a high-cost area or want to buy a more expensive home, a jumbo loan gives you the option to do so – provided you can qualify. Keep in mind that jumbo loans will typically cost more due to the larger loan balance and can be harder to obtain due to stricter requirements. 

Reach out to Freedom Mortgage today to explore borrowing options and get pre-qualified for a jumbo or conforming loan depending on your needs.