Key takeaways
- A jumbo loan exceeds the conforming limit for the county, which adjusts annually.
- Jumbo underwriting is manual and stricter: lower DTI ceilings, higher scores, larger reserves.
- Reserve requirements of six to twelve months of payments are common.
- A conforming first plus a second lien sometimes costs less than a single jumbo.
Definition and limits
Conforming loan limits are set annually by the Federal Housing Finance Agency and vary by county, with substantially higher ceilings in designated high-cost areas. Any loan above the applicable limit is jumbo — it cannot be sold to Fannie Mae or Freddie Mac, so the lender either holds it or sells it into the private market.
That distinction drives everything else. Without agency backing, the lender bears more risk and sets its own guidelines, which vary noticeably between institutions. Jumbo shopping rewards effort more than conforming shopping does.
Tighter underwriting
Expect credit score minimums around 700 to 720, debt-to-income ceilings closer to 40% than 50%, and full documentation of income and assets. Self-employed borrowers face deeper scrutiny — typically two years of returns plus a year-to-date profit and loss statement.
Reserves are the requirement that catches borrowers off guard. Many jumbo programs require six to twelve months of full housing payments in liquid reserves after closing, and some require more on larger balances or second homes. Retirement accounts often count at a discounted value.
Structure alternatives
Where the loan amount only modestly exceeds the conforming limit, a piggyback structure — a conforming first mortgage plus a second lien or HELOC covering the excess — can price better than a single jumbo, while also avoiding mortgage insurance. It adds complexity and a second, usually variable, payment.
Portfolio lenders and credit unions are worth including in your search. Because they hold jumbo paper on balance sheet, their pricing and flexibility can differ sharply from national lenders, particularly for borrowers with substantial assets held at the institution.
Frequently asked questions
Are jumbo rates higher than conforming?
Not always. Jumbo rates have periodically priced below conforming, because jumbo borrowers are strong credits and banks compete for the relationship. Compare actual quotes rather than assuming.
Can I get a jumbo loan with 10% down?
Yes, some programs allow it, though pricing and reserve requirements tighten considerably. Below 20% you may face mortgage insurance or a second lien structure.
Do jumbo loans take longer to close?
Usually somewhat, because underwriting is manual and often requires a second appraisal above certain loan amounts. Budget 45 days.
Sources & further reading
- Federal Housing Finance Agency conforming loan limit announcements
- Fannie Mae Selling Guide, Loan Limits
- Mortgage Bankers Association jumbo market commentary
Figures and rules change. Verify current requirements with the issuing agency or a licensed professional before acting.