In many American cities, a modest family home can easily cost $800,000, $1 million, or more. When you need to borrow more than the conforming loan limits allow, you enter jumbo loan territory—mortgages too large for Fannie Mae and Freddie Mac to purchase. These loans carry different requirements, different rates, and demand stronger borrower profiles.
What Is a Jumbo Loan?
Conforming loan limits set the maximum mortgage size that Fannie Mae and Freddie Mac will buy from lenders. In 2026, that limit is $832,750 in most of the country. High-cost areas like San Francisco, New York City, Los Angeles, and parts of Hawaii and Alaska have higher limits—up to $1,249,125.
Any mortgage exceeding these limits is a jumbo loan (sometimes called a non-conforming loan). Because these loans can't be sold to the government-sponsored enterprises, lenders either keep them on their own books or sell them to private investors. This changes the risk equation and affects who qualifies.
Jumbo loans aren't inherently bad—they're simply different. For buyers in expensive markets, they're often the only option. And for well-qualified borrowers, jumbo loan terms can be surprisingly competitive.
Qualification Requirements
Because lenders take on more risk with jumbo loans, they require stronger borrower profiles than conforming loans.
Credit score: While some lenders advertise jumbo loans for 680+ borrowers, most want 700 or higher. The best rates go to borrowers with 740+ scores. If your credit isn't excellent, you'll either pay significantly higher rates or have difficulty finding a lender.
Down payment: Expect to put down 10-20% or more. Some lenders require 20% minimum on jumbo loans; others allow 10% with stricter requirements elsewhere. The days of low-down-payment jumbo loans largely ended with the 2008 financial crisis.
Debt-to-income ratio: Lenders typically want your DTI below 43%, with some preferring 38% or lower. Given the larger loan amounts, this means you need substantial income. A $1 million mortgage at 7% creates a payment around $6,650—requiring roughly $180,000+ annual income just to meet the housing portion of the 28/36 rule.
Reserves: Expect to show significant cash reserves—often 6-12 months of mortgage payments. On a $7,000 monthly payment, that's $42,000-$84,000 in liquid assets after closing. Retirement accounts may count partially, but lenders prefer actual cash or easily liquidated investments.
Documentation: Jumbo loans require thorough documentation of income, assets, and employment. Self-employed borrowers face intense scrutiny. Expect to provide two years of tax returns, several months of bank statements, and detailed explanations of any large deposits or financial anomalies.
Rates and Costs
Historically, jumbo loans carried notably higher interest rates than conforming loans—sometimes 0.5% or more. Today, the gap has narrowed considerably. In some market conditions, jumbo rates are actually competitive with or even lower than conforming rates. This happens because jumbo borrowers tend to have excellent credit and substantial assets, making them lower-risk despite the larger loan amounts.
That said, jumbo loan pricing is more variable. Without the standardized secondary market that exists for conforming loans, each lender sets its own pricing. Shopping multiple lenders is even more important for jumbo loans—rate differences of 0.25% or more are common.
Closing costs on jumbo loans are typically proportional to the loan size. Appraisals may cost more because the appraiser needs to find comparable sales for high-value properties. Some lenders charge higher origination fees on jumbo loans. Review the Loan Estimate carefully and compare total costs, not just rates.
Alternatives to Jumbo Loans
If you're just above the conforming limit, consider alternatives that might offer better terms.
Piggyback loans combine a conforming first mortgage with a smaller second mortgage or home equity line of credit. For example, on a $900,000 purchase in a standard-limit area, you might take a $832,750 conforming first mortgage plus a $67,250 HELOC, keeping the primary loan within conforming limits. The combined rate might be lower than a jumbo, though you'll have two payments to manage.
Larger down payment: If you can put enough down to bring the loan below conforming limits, you'll access better rates and easier qualification. It's worth calculating whether the rate savings justify a larger down payment versus investing that money elsewhere.
ARM considerations: Adjustable-rate jumbo mortgages often carry lower initial rates than fixed-rate jumbos. If you plan to sell or refinance within the fixed period (typically 5, 7, or 10 years), an ARM might save money. Learn more about fixed vs. adjustable rates.