A jumbo loan is a mortgage larger than the conforming loan limit, the maximum loan size that Fannie Mae and Freddie Mac can buy from lenders. The Federal Housing Finance Agency (FHFA) sets that limit each year, and it is higher in designated high-cost areas. Because jumbo loans fall outside those standard guidelines, lenders set their own rules, and underwriting is usually more demanding.
What "conforming" means
Most mortgages in the US are conventional loans, meaning they are not part of a government program like FHA, VA or USDA. Among conventional loans, the most common are conforming loans: loans that stay within the conforming loan limit and follow Fannie Mae or Freddie Mac rules. Lenders like conforming loans because they can sell them, which frees up money to lend again.
When a loan exceeds the conforming limit, Fannie Mae and Freddie Mac cannot buy it. The lender either keeps it on its own books or sells it to private investors with their own requirements. That is what makes a loan "jumbo."
How the conforming loan limit is set
Under the Housing and Economic Recovery Act (HERA), FHFA adjusts the baseline conforming loan limit each year to reflect changes in average US home prices, using its House Price Index. When average values rise, the limit rises by the same proportion.
The limit is not the same everywhere:
- Baseline limit. Applies in most counties.
- High-cost areas. Where local median home values are high compared with the baseline, the limit is set higher, up to a ceiling defined by law.
- Special areas. Alaska, Hawaii, Guam and the US Virgin Islands have separate statutory provisions.
- Property size. Limits are higher for two-, three- and four-unit properties than for single-unit homes.
Because the limits change each year and vary by county and number of units, check FHFA's published values for your county, or ask a lender, before deciding whether your loan will be jumbo.
Conforming jumbo versus non-conforming jumbo
The CFPB describes two groups that both get called "jumbo":
- High-balance conforming loans exceed the baseline limit but stay within the higher limit for a high-cost county. They still follow Fannie Mae or Freddie Mac rules and are available only in those counties.
- Non-conforming jumbo loans exceed the limit for the county entirely. These follow lender or investor rules and usually require good credit and a sizable down payment.
In everyday use, "jumbo" usually means the second group.
Get answers for your situation. Programs vary by borrower, property and investor.
How jumbo underwriting is different
Because the lender or private investor carries more risk on a large loan, jumbo guidelines tend to be stricter and less standardized. Common differences include:
- Credit. Lenders often look for stronger credit histories than on conforming loans.
- Reserves. You may need to show more savings left over after closing, often measured in months of housing payments.
- Documentation. Expect full documentation of income and assets, with extra review of self-employment income, bonuses, commissions and investment income.
- Debt-to-income. Some lenders set tighter limits on how much of your income can go to debt.
- Appraisal. Some lenders require a second appraisal on larger loans or unique homes.
- Down payment. Many jumbo programs expect more cash at closing than conforming loans.
Since each lender writes its own rules, a borrower who does not fit one jumbo program may fit another.
Rates and costs on jumbo loans
The CFPB notes that a jumbo mortgage may cost more than a conforming mortgage, but that is not always true. Pricing depends on the lender's appetite for large loans, your credit and assets, the loan size and market conditions. Compare Loan Estimates from several lenders, and look at the full cost of the loan, including points and fees, not just the rate.
Jumbo loans come in both fixed-rate and adjustable-rate versions, with a range of term options. If you consider an adjustable rate, make sure you understand when and how the rate can change.
Alternatives to a jumbo loan
- A larger down payment that brings the loan amount under the conforming limit for your county.
- A high-balance conforming loan if the home is in a high-cost county and the loan fits within that county's limit.
- A first mortgage plus a second mortgage, sometimes called a piggyback, where the first loan stays within the conforming limit and a second loan covers part of the rest. Two loans add complexity, so compare the combined cost.
- A VA-backed loan for eligible Veterans and service members. VA notes you can borrow above the conforming limit, though a down payment is generally needed in that case.
Self-employed and asset-heavy borrowers
Many jumbo borrowers have income that is harder to document than a single salary: business ownership, partnership distributions, commissions, bonuses, stock compensation or investment income. Jumbo lenders generally want a clear, consistent history for these sources. Expect questions about whether variable income is likely to continue and about how business income flows to you personally.
Some lenders offer programs that look at assets differently, such as considering investment or retirement balances as a source of qualifying income. These programs vary widely, and they may have different pricing or reserve rules. If your wealth is mostly in assets rather than paychecks, ask lenders whether they offer this kind of review.
Jumbo loans and property type
Property type can matter more on a jumbo loan. Condos may need to meet the lender's project standards. Homes with significant acreage, unusual construction or few comparable sales nearby can be harder to appraise, which is one reason some lenders ask for a second appraisal. Second homes are often eligible for jumbo financing, but terms may differ from those for a primary residence, and investment properties may be limited or excluded. Tell the lender early how you plan to use the home.
Jumbo refinancing
If you already have a jumbo loan, refinancing works under the same lender-specific rules. A rise in the conforming limit over time can sometimes bring a jumbo balance within the conforming range, which may open up more options. A lender can check where your current balance stands against your county's limit.
Preparing for a jumbo application
- Recent personal tax returns, plus business returns if you are self-employed
- Recent pay stubs, W-2s and documentation of bonus or commission history
- Several months of statements for bank, brokerage and retirement accounts
- A clear paper trail for any large deposits or gifts
- Information on any other properties you own and their loans
A loan officer can confirm the conforming limit for your county, tell you whether your loan would be jumbo, and compare jumbo and conforming options for your situation. Programs vary by borrower, property and investor, and all loans are subject to credit approval.
Frequently asked questions
Who sets the conforming loan limit?
The Federal Housing Finance Agency sets the conforming loan limit values each year for loans that Fannie Mae and Freddie Mac acquire. The baseline is adjusted to reflect changes in average home prices, and higher limits apply in designated high-cost areas and for properties with two to four units.
Is a jumbo loan harder to get?
Often it is more demanding. Lenders typically look for stronger credit, more savings in reserve and fuller documentation of income and assets. Because each lender sets its own rules, though, requirements vary, and a borrower who does not fit one program may fit another.
Do jumbo loans always cost more?
Not always. The CFPB notes a jumbo mortgage may cost more than a conforming one, but pricing depends on the lender, your financial profile, the loan size and market conditions. Comparing Loan Estimates from several lenders for the same loan amount is the clearest way to see the difference.
How do I find the conforming loan limit for my county?
FHFA publishes the conforming loan limit values for every county each year. A lender can also look up the limit for the property's county and number of units and tell you whether your loan amount would be conforming, high-balance conforming or jumbo.
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