Jumbo Vs. Conventional Loans: What’s The Difference?

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Overview: Jumbo loans vs. conventional loans

A conventional loan is a mortgage that’s originated and financed by a private lender, rather than the federal government. By that definition, a jumbo loan can actually be a type of conventional loan, so it’s not exactly an apples-to-apples comparison. A better comparison might be jumbo conventional loans, which are nonconforming, versus conforming conventional loans.

Conventional mortgages can be either conforming or nonconforming. A conforming mortgage meets the requirements set by the Federal Housing Finance Agency (FHFA) — the most common of these stipulates that the size of the loan be set at or below certain dollar limits. These limits vary from state to state, and even by counties within states. For 2025, the conforming loan limit is $806,500 in most areas, and up to $1,209,750 in higher-priced places.

A jumbo loan is a conventional loan, but since it doesn’t conform to the FHFA standards due to its size, it’s considered nonconforming. If you’re financing the purchase of a high-priced home, a jumbo loan can allow you to borrow the amount you need, even if that amount is higher than the conforming loan limit.

Many mortgage lenders offer jumbo loans up to $3 million or $5 million. You might be able to find jumbo loans in even higher amounts, especially if you work with a mortgage broker who’s a jumbo specialist.

Key differences between jumbo and conforming loans

While jumbo and conforming loans are both conventional loans, there are some significant differences to be aware of.

Qualifying for a jumbo loan

While there are several qualifying factors that impact whether you can get a jumbo loan, the most important is your credit score. The minimum required is higher, for a start: 700 for a jumbo, as opposed to 620 for a conforming conventional loan. And while you can qualify with the minimum credit score, the best mortgage rates go to borrowers with scores of 740 or higher.

You should also be prepared to make at least the minimum down payment — which, not surprisingly, is typically a larger percentage of the purchase price than for a conforming conventional loan. And you’ll also need to meet the lender’s debt-to-income (DTI) thresholds, which tend to be lower (that is, take up less of your monthly earnings).

It’s possible, eventually, to refinance a jumbo loan into a conventional conforming loan — provided the jumbo’s remaining balance is at or below your area’s conforming loan limit.

Mortgage rates for a jumbo loan

Many jumbo loan rates may actually be lower than those on some conforming loan offers, since lenders still want to remain competitive. Otherwise, jumbos tend to be influenced by the factors that move mortgage rates and interest rates in general, such as the benchmark federal funds rate the Federal Reserve sets. The particular interest rate you’ll get, of course, depends on your personal financial circumstances.

Deciding which loan is right for you

Jumbo and conventional conforming loans each have unique purposes, so it’s important to choose the right one for your situation and financing needs.

You might benefit from a jumbo loan if:

• You are purchasing a high-priced home
• You are purchasing in an area with a high cost of living
• You have a high income and an excellent credit score
• Your monthly debt load is low
• You can make a down payment of 20 percent or more

A conforming loan may be a better option if:

• You are purchasing a moderate home, priced within the local loan limits
• You have a lower income
• Your credit score is just “good” or “fair”
• You have little savings or financial assets
• You have limited funds available for a down payment

FAQs

• Are jumbo loans more difficult to qualify for?
  

  Yes — the lending criteria for jumbo loans are tighter than for conforming loans, mainly because the loan amounts are higher. In addition, they pose an elevated risk to lenders, because they can’t be sold on the secondary mortgage market as easily.

• Is mortgage insurance required for jumbo loans?
  

  Not usually, because most lenders require a down payment of at least 20 percent to get a jumbo loan. Since that 20 percent threshold is met (or exceeded), private mortgage insurance is not required.