Jumbo loans are mortgages exceeding conforming loan limits ($766,550 in most areas for 2024). They require a minimum credit score of 700+ (720+ preferred), a down payment of 10-20%, a debt-to-income ratio under 43% and significant cash reserves (6-12 months of payments). Jumbo rates run 0.25-0.5% higher than conforming loans due to increased lender risk.
What Is a Jumbo Loan?
A jumbo loan is any mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These limits determine the maximum loan Fannie Mae and Freddie Mac can purchase.
2024 Conforming Loan Limits
| Area Type | Limit |
|---|---|
| Most U.S. counties | $766,550 |
| High-cost areas | Up to $1,149,825 |
| Alaska, Hawaii, Guam, Virgin Islands | Up to $1,149,825 |
If your loan exceeds these limits, you need a jumbo loan.
High-Cost Area Examples
Many expensive markets have higher limits:
- San Francisco County, CA: $1,149,825
- Los Angeles County, CA: $1,149,825
- New York County (Manhattan), NY: $1,149,825
- Washington, D.C.: $1,149,825
- Boston area, MA: $828,000
Check the FHFA website for your specific county.
Why Jumbo Loans Exist
Fannie Mae and Freddie Mac can’t buy loans above conforming limits. Lenders must hold jumbo loans on their own books or sell them to private investors, creating additional risk—hence stricter requirements.
Jumbo Loan Requirements
Credit Score
| Score Range | Approval Likelihood |
|---|---|
| 740+ | Best rates and terms |
| 720-739 | Very good options |
| 700-719 | Good options, slightly higher rates |
| 680-699 | Limited lenders, higher rates |
| Below 680 | Difficult, very few options |
Most jumbo lenders require minimum 700, with 720+ strongly preferred.
Down Payment
| Down Payment | Availability |
|---|---|
| 20%+ | Standard, best rates |
| 15% | Available from many lenders |
| 10% | Available, may require PMI |
| Less than 10% | Very limited |
Unlike conforming loans with 3-5% down options, jumbos typically require substantial down payments.
On a $1.2 million home:
- 10% down: $120,000
- 15% down: $180,000
- 20% down: $240,000
Debt-to-Income Ratio
Most jumbo lenders cap DTI at 43%, with some allowing up to 45% for strong borrowers.
Calculation example:
Income: $25,000/month gross Maximum debts at 43%: $10,750/month
If other debts are $1,500/month: Maximum housing payment: $9,250/month
Cash Reserves
Jumbo loans require substantial reserves—money left after closing.
| Loan Amount | Typical Reserve Requirement |
|---|---|
| $766,551 - $1 million | 6 months of payments |
| $1 - $2 million | 9-12 months of payments |
| Over $2 million | 12+ months of payments |
Example: $1.2 million loan, $6,500 monthly payment Required reserves: $6,500 × 9 = $58,500 minimum
Reserves can include:
- Checking and savings accounts
- Investment accounts (typically counted at 70%)
- Retirement accounts (typically counted at 60-70%)
Income and Employment
W-2 employees:
- 2 years of stable employment
- Consistent or increasing income
- Verification of employment required
Self-employed:
- 2 years of business tax returns
- Stable or growing income
- May need CPA letter
- More scrutiny than conforming loans
Asset-based qualification: Some jumbo lenders allow qualification based on assets rather than income for high-net-worth borrowers.
Jumbo Loan Rates
Current Rate Comparison
Jumbo rates typically run 0.25-0.5% higher than conforming rates:
| Loan Type | Typical Rate |
|---|---|
| 30-year conforming | 6.50% |
| 30-year jumbo | 6.75-7.00% |
| 15-year conforming | 5.75% |
| 15-year jumbo | 6.00-6.25% |
Why Higher Rates?
More risk for lenders:
- Can’t sell to Fannie/Freddie
- Larger loan = larger potential loss
- Smaller pool of qualified buyers if foreclosure needed
However: In some markets, jumbo rates can be comparable to or even lower than conforming rates due to competition for wealthy borrowers.
Jumbo Loan Types
Fixed-Rate Jumbo
- Rate stays the same for entire term
- Terms: 15, 20 or 30 years
- Best for long-term stability
Adjustable-Rate Jumbo (ARM)
- Lower initial rate
- Adjusts after 5, 7 or 10 years
- Popular with jumbo borrowers who expect to sell or refinance
Common jumbo ARMs:
- 5/1 ARM: Fixed 5 years, adjusts annually
- 7/1 ARM: Fixed 7 years, adjusts annually
- 10/1 ARM: Fixed 10 years, adjusts annually
Interest-Only Jumbo
- Pay only interest for initial period (5-10 years)
- Lower initial payments
- Principal payments begin after interest-only period
- Higher total interest cost
Example: $1 million loan at 6.75%
- Interest-only payment: $5,625/month
- Fully amortizing payment: $6,488/month
- Difference: $863/month
Jumbo vs. Conforming Loan Comparison
| Feature | Conforming | Jumbo |
|---|---|---|
| Maximum loan | $766,550 (most areas) | No limit |
| Minimum credit | 620 | 700+ |
| Minimum down | 3% | 10-20% |
| DTI limit | 43-50% | 43% |
| Reserves | 2 months typical | 6-12 months |
| Rate | Lower | 0.25-0.5% higher |
| PMI | Available | Limited |
| Processing | Standardized | More customized |
Strategies for Jumbo Borrowers
Piggyback Loan
Use two loans to stay under jumbo limits:
- First mortgage at conforming limit
- Second mortgage for the remainder
- May result in lower overall rate
Example: $900,000 purchase, 20% down
- Needed: $720,000 financing
- First mortgage: $700,000 (conforming)
- Second mortgage: $20,000 (HELOC)
- Avoid jumbo rates on most of the loan
Larger Down Payment
Putting more down can:
- Keep you under jumbo limits
- Reduce your rate
- Eliminate PMI concerns
- Improve approval odds
Rate Buydown
Jumbo lenders often offer points to reduce rates. With larger loan amounts, the savings can be substantial.
Example: $1 million loan
- 1 point cost: $10,000
- Rate reduction: 0.25%
- Monthly savings: $150
- Break-even: 67 months
ARM Strategy
Many jumbo borrowers choose ARMs because:
- Lower initial rate saves significant money
- High-value homeowners often move within 7-10 years
- Refinancing is common in this market
Documentation Requirements
Income Documentation
W-2 employees:
- 2 years of W-2s
- 30 days of pay stubs
- Verification of employment
- May require employer letter
Self-employed:
- 2 years of personal tax returns
- 2 years of business tax returns
- Year-to-date profit and loss
- Business bank statements (sometimes)
- CPA letter (sometimes)
Asset Documentation
- 2-3 months of bank statements (all pages)
- Investment account statements
- Retirement account statements
- Gift documentation (if applicable)
- Source of down payment verification
Additional Requirements
- Explanation letters for any credit issues
- Proof of reserves after closing
- Additional property documentation
- Insurance requirements (may be higher)
Jumbo Loan Process
Timeline
Jumbo loans often take longer than conforming:
- Conforming: 30-45 days
- Jumbo: 45-60 days
Why Longer?
- More documentation required
- Manual underwriting common
- Additional verification steps
- Property appraisal may take longer (unique properties)
Appraisal Considerations
High-value properties may need:
- Two appraisals (for very large loans)
- Appraisers with luxury market experience
- More detailed property analysis
- Longer appraisal turnaround
Who Should Consider a Jumbo Loan?
Ideal Candidates
High income, high assets: Professionals, executives, business owners with substantial wealth
Buying in expensive markets: Coastal cities, major metros where median prices exceed conforming limits
Established credit: Long credit history with high scores
Stable finances: Consistent income, substantial savings
When to Explore Alternatives
If you’re stretching: Jumbo requirements are strict. If you barely qualify, consider:
- Buying less expensive property
- Waiting to save larger down payment
- Improving credit before applying
If rates are unfavorable: Sometimes waiting for better jumbo rate environment makes sense
Frequently Asked Questions
What is the minimum down payment for a jumbo loan?
Most lenders require 10-20% down for jumbo loans. Some offer 10% down with PMI, but 20% is standard for the best rates and terms.
Is it harder to qualify for a jumbo loan?
Yes. Jumbo loans have stricter requirements: higher credit scores (700+ vs 620), larger down payments (10-20% vs 3%), more reserves (6-12 months vs 2 months) and lower DTI limits.
Can I get a jumbo loan with 10% down?
Yes, some lenders offer 10% down jumbo loans. You’ll typically need excellent credit (720+), pay PMI and may face higher rates than with 20% down.
What credit score do I need for a jumbo loan?
Most lenders require 700 minimum, with 720+ preferred for best rates. Some lenders work with 680+ but options are limited and rates are higher.
Are jumbo loan rates higher?
Typically yes—0.25-0.5% higher than conforming rates. However, in competitive markets, jumbo rates can sometimes match or beat conforming rates for well-qualified borrowers.
How much reserves do I need for a jumbo loan?
Expect to need 6-12 months of mortgage payments in reserves after closing. Larger loans require more reserves. Reserves can include savings, investments and retirement accounts.
Michael Chen
Certified Financial Planner, Mortgage Specialist
Our team of mortgage experts provides accurate, up-to-date information to help you make informed decisions about your home financing.
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