Jumbo Loans: What They Are, Requirements & How to Qualify

A jumbo loan is a mortgage that exceeds the Federal Housing Finance Agency (FHFA) conforming loan limits—$832,750 for most U.S. counties in 2026. If you're buying a home in an expensive market or need to finance a luxury property, a jumbo loan may be your only financing option. Unlike conventional conforming loans, jumbo mortgages aren't backed by Fannie Mae or Freddie Mac, which means lenders face greater risk and typically require higher credit scores (700+), larger down payments (10-20%), and more substantial cash reserves (6-12 months of payments). However, jumbo loan interest rates have become increasingly competitive, often matching or even beating conforming loan rates as lenders compete for high-value clients.

What Is a Jumbo Loan?

A jumbo loan is a type of mortgage used to finance properties that exceed the conforming loan limits set by the FHFA. These limits determine the maximum loan amount that government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac—can purchase or guarantee.

When a mortgage exceeds these limits, it's classified as a "jumbo" or "non-conforming" loan. Since Fannie Mae and Freddie Mac are legally restricted from purchasing loans above the conforming limit, jumbo loans cannot be sold on the secondary mortgage market in the traditional way. Instead, lenders typically keep these loans on their own books as "portfolio loans" or sell them to private investors.

Why Jumbo Loans Exist

The primary reason jumbo loans exist is the structure of America's secondary mortgage market. When Congress created Fannie Mae and Freddie Mac, it imposed limits on the loan sizes these entities could purchase. This was intended to focus GSE support on "mainstream" home purchases while leaving financing for more expensive properties to the private market.

For homebuyers in high-cost markets like San Francisco, New York City, or Los Angeles, conforming limits often don't cover even modestly-sized homes. Jumbo loans fill this gap, providing financing options for properties that exceed what traditional conforming mortgages allow.

Historical Context

Conforming loan limits have increased substantially over time to keep pace with rising home prices:

• Early 1970s: $33,000
• 2006-2008: $417,000
• 2025: $806,500
• 2026: $832,750

The Housing and Economic Recovery Act of 2008 (HERA) established the formula FHFA now uses to adjust conforming loan limits annually based on changes in average U.S. home prices.

2026 Conforming Loan Limits

Understanding current conforming loan limits is essential for determining whether you need a jumbo loan. According to the FHFA's November 2025 announcement, here are the 2026 limits:

How Limits Are Calculated

The FHFA adjusts baseline conforming loan limit values annually to reflect changes in average U.S. home prices. For 2026, the FHFA determined that house prices increased 3.26% on average between Q3 2024 and Q3 2025, resulting in a baseline limit increase of approximately $26,250.

High-Cost Area Limits

Not all areas use the baseline limit. In counties where 115% of the local median home value exceeds the baseline, higher limits apply. The ceiling is set at 150% of the baseline limit—$1,249,125 for single-family homes in 2026.

Special provisions apply to Alaska, Hawaii, Guam, and the U.S. Virgin Islands, where the baseline starts at $1,249,125 and can reach as high as $1,873,675 in certain areas.

Key Threshold

Any mortgage exceeding $832,750 in most areas (or the applicable local high-cost limit) requires jumbo financing rather than a conforming conventional mortgage.

Jumbo Loan Requirements

Because lenders retain jumbo loans on their books rather than selling them to GSEs, they bear greater default risk. This explains why jumbo loan requirements are typically stricter than those for conforming mortgages. While specific requirements vary by lender, here are the typical standards:

Credit Score Requirements

Most lenders require a minimum credit score of 700 for jumbo loan approval, though many prefer scores of 720-760 or higher, according to Investopedia. This is notably stricter than conforming loans, which may accept scores as low as 620.

Higher credit score requirements reflect the greater financial risk lenders assume with larger loan amounts. A borrower defaulting on a $1 million mortgage poses significantly more risk than one defaulting on a $400,000 loan.

Down Payment Expectations

Jumbo loans typically require down payments ranging from 10% to 20%, with some lenders requiring 25-30% for very large loan amounts. This contrasts with conforming loans, which may accept down payments as low as 3%.

Historically, 30% down payments were standard for jumbo loans. Requirements have loosened as lenders compete for high-net-worth borrowers, but expect to bring more capital to the table than you would for a conforming mortgage.

Cash Reserve Requirements

One of the most significant differences between jumbo and conforming loans is the cash reserve requirement. Lenders typically require 6 to 12 months of mortgage payments held in liquid assets (savings accounts, money market accounts, or easily accessible investments).

These reserves demonstrate your ability to continue making payments during financial hardship, such as job loss or unexpected expenses. You'll need to document these reserves with bank statements and investment account records.

Debt-to-Income Ratio (DTI)

Most jumbo lenders cap DTI ratios at 43% or lower, though some may offer flexibility with strong compensating factors (exceptional credit, substantial assets, or significant reserves). DTI is calculated by dividing your total monthly debt payments by your gross monthly income.

If you're planning to apply for a jumbo loan, it's worth creating a budget to understand your current debt obligations and identify opportunities to reduce your DTI before applying.

Documentation Requirements

Jumbo loans often require more extensive documentation than conforming mortgages:

• Tax returns: 2 years (full returns, not just transcripts)
• W-2s and 1099s: 2 years
• Pay stubs: At least 30 days of recent statements
• Bank statements: 60 days minimum
• Investment account statements: Current balances
• Documentation of other real estate holdings
• Information on existing loans and debts

Appraisal Requirements

Some lenders require two independent appraisals for jumbo loans rather than the single appraisal required for conforming loans. This ensures the property value adequately supports the larger loan amount and protects the lender's investment in high-value transactions.

Jumbo Loans vs. Conventional Conforming Loans

Understanding the differences between jumbo and conforming loans helps you prepare for the application process and set realistic expectations. Here's a comprehensive comparison:

Key Differences Explained

Lender flexibility is a notable advantage of jumbo loans. Because they aren't sold to GSEs, lenders can establish their own criteria and may bend rules for exceptionally well-qualified borrowers. If your application is slightly outside standard parameters but you have significant compensating factors, a jumbo lender might still approve you.

Relationship banking often comes into play with jumbo mortgages. Traditional banks frequently offer competitive jumbo rates to attract wealthy clients who may also use other bank services. If you already have substantial assets at a particular bank, inquire about relationship pricing.

Processing differences are also common. While conforming loans often use automated underwriting systems, jumbo loans frequently undergo manual underwriting with human review of your complete financial picture. This can work in your favor if your situation is complex but financially sound.

Jumbo Loan Interest Rates

Historically, jumbo mortgages carried significantly higher interest rates than conforming loans. The logic was straightforward: larger loans meant greater risk, and lenders charged accordingly. However, the rate landscape has shifted dramatically.

Current Market Conditions

Today, jumbo loan rates are often on par with conventional mortgages—and in some cases may actually be lower than conforming loan rates, according to Bankrate. Several factors drive this trend:

• Competition for wealthy clients: Banks aggressively pursue high-net-worth borrowers who represent valuable long-term customers
• Improved risk management: Better underwriting and stricter qualification requirements have reduced default rates on jumbo loans
• Low interest rate environment: Overall low rates have compressed the historical spread between jumbo and conforming products

Factors Affecting Your Jumbo Rate

Several factors influence the interest rate you'll receive:

• Credit score: Higher scores typically qualify for better rates
• Loan-to-value (LTV) ratio: Lower LTVs (larger down payments) often secure better rates
• Property type and location: Primary residences typically get better rates than investment properties
• Lender competition: Banks in your area may offer promotional rates
• Economic conditions: Overall market rates affect jumbo pricing

Rate Shopping Recommendations

Given the variability in jumbo rates, effective comparison shopping can save thousands over the life of your loan. Consider getting quotes from:

• Traditional banks (especially those where you have existing relationships)
• Credit unions
• Mortgage brokers (who can compare multiple lenders)
• Online mortgage lenders
• Private banks and wealth management firms

Pros and Cons of Jumbo Loans

Before pursuing a jumbo mortgage, carefully weigh the advantages and disadvantages.

Advantages

Higher loan amounts make purchasing expensive properties possible without multiple mortgages or alternative financing. In high-cost markets, jumbo loans may be the only viable option for financing a home.

Competitive interest rates mean you're not necessarily paying a premium for larger loan amounts. Banks often offer attractive rates to acquire high-value customers.

Flexible loan options allow you to choose between fixed-rate and adjustable-rate mortgages with various term lengths (15-year, 30-year, etc.). You can also refinance as needed.

Relationship benefits may extend beyond your mortgage. Jumbo borrowers often gain access to private banking services, wealth management advice, and preferential treatment on other financial products.

Disadvantages

Stricter qualification requirements mean not everyone can qualify. Higher credit scores, larger down payments, and substantial cash reserves create significant barriers to entry.

Higher closing costs often accompany jumbo loans because many fees are calculated as a percentage of the loan amount. A 1% origination fee on a $1 million loan costs $10,000 versus $4,000 on a $400,000 conforming loan.

Limited mortgage interest deduction affects high-income borrowers. The Tax Cuts and Jobs Act of 2017 capped the mortgage interest deduction at interest paid on $750,000 of mortgage debt for loans originated after December 16, 2017. If you have a $1.2 million mortgage, you can only deduct interest on the first $750,000.

Larger financial commitment means higher monthly payments, more total interest paid over the loan's life, and greater financial exposure during market downturns.

How to Qualify for a Jumbo Loan

Successfully qualifying for a jumbo loan requires preparation and attention to detail. Follow this step-by-step process to maximize your approval chances:

Step 1: Check and Improve Your Credit Score

Obtain credit reports from all three major bureaus (Equifax, Experian, and TransUnion) and review them for errors. Your target score should be at least 700, though 720+ positions you for better rates.

If your score needs improvement, focus on:

• Paying down credit card balances (reduce utilization below 30%)
• Making all payments on time
• Avoiding new credit applications
• Disputing any errors on your reports

Understanding credit score basics can help you identify specific actions to boost your score.

Step 2: Calculate Your DTI Ratio

Add up all monthly debt payments (credit cards, auto loans, student loans, existing mortgages, etc.) and divide by your gross monthly income. Most jumbo lenders require DTI below 43%.

If your DTI is too high, consider:

• Paying off smaller debts before applying
• Increasing your income (raises, bonuses, side income)
• Choosing a less expensive property

Step 3: Save for Down Payment and Closing Costs

Plan for a 10-20% down payment minimum, plus 2-5% for closing costs. For a $1 million home, you might need:

• Down payment (20%): $200,000
• Closing costs (3%): $30,000
• Total cash needed: $230,000+

Document the source of all funds. Lenders will scrutinize large deposits, so avoid any unusual account activity before applying.

Step 4: Build Cash Reserves

Accumulate 6-12 months of mortgage payments in liquid accounts. For a $6,000 monthly payment, this means $36,000-$72,000 in accessible reserves beyond your down payment.

Acceptable reserve accounts include:

• Savings accounts
• Money market accounts
• Checking accounts
• Non-retirement investment accounts
• Vested retirement funds (often counted at a discount)

Step 5: Gather Documentation

Compile comprehensive financial documentation before beginning the application process:

• Tax returns: Complete returns with all schedules (2 years)
• Income verification: W-2s, 1099s, pay stubs (30+ days)
• Asset statements: Bank and investment accounts (60+ days)
• Property information: Purchase agreement, property details
• Additional documentation: Business financials (if self-employed), rental income documentation, divorce decrees, etc.

Step 6: Shop Multiple Lenders

Get quotes from various lender types:

• Your current bank (relationship pricing potential)
• Other major banks
• Credit unions
• Mortgage brokers
• Online lenders

Request Loan Estimates from each lender for accurate rate and fee comparisons.

Step 7: Get Pre-Approved

Once you've selected a lender, submit your application and documentation for pre-approval. This gives you a clearer picture of loan terms and strengthens your position when making offers on properties.

VA Jumbo Loans for Veterans

Veterans and active-duty service members may access jumbo financing through the VA Home Loan program, which offers significant advantages over conventional jumbo mortgages.

Key VA Jumbo Loan Features

No loan limits for full entitlement: Veterans with full entitlement have no VA loan limit. This means you can borrow as much as a lender will approve—potentially millions of dollars—with no down payment required.

No private mortgage insurance (PMI): Unlike conventional loans, VA loans never require PMI regardless of down payment amount. On a large loan, this can save hundreds of dollars monthly.

Competitive interest rates: VA jumbo loans typically offer favorable rates compared to conventional jumbo products.

Understanding VA Entitlement

VA loan entitlement can be confusing, but it's crucial for understanding your borrowing power:

• Basic entitlement: $36,000 (supports loans up to $144,000)
• Bonus entitlement: For loans above $144,000, the VA guarantees up to 25% of the conforming loan limit
• Full entitlement: If you've never used VA benefits or have repaid and restored your entitlement, you have full entitlement with no loan limit

When Down Payment May Be Required

If you don't have full entitlement (perhaps you have an existing VA loan), you may need a down payment if your remaining entitlement doesn't cover 25% of the loan amount. A VA lender can calculate your specific situation.

For first-time homebuyers with military service, understanding VA loan options is essential before exploring conventional jumbo financing.

For more details on VA financing, see our comprehensive VA loan guide.

Who Should Consider a Jumbo Loan?

Jumbo loans aren't right for everyone. Here's who typically benefits most from jumbo financing:

Ideal Candidates

High-income earners with annual incomes of $250,000 to $500,000 or more, stable employment history, and strong credit profiles. This often includes professionals like physicians, attorneys, executives, and successful business owners.

"HENRYs" (High Earners, Not Rich Yet) is a term NerdWallet uses to describe people with substantial income but still building wealth. These borrowers need financing for expensive homes but haven't yet accumulated enough assets for cash purchases.

Buyers in expensive markets where even modest homes exceed conforming limits have no choice but jumbo financing. In areas like San Francisco, Manhattan, or coastal Southern California, jumbo loans are simply part of homeownership.

Investment property buyers purchasing high-value rental properties or vacation homes that exceed conforming limits may also need jumbo financing.

Who Should Avoid Jumbo Loans

Consider alternatives if you:

• Have credit scores below 700
• Cannot accumulate 6+ months of cash reserves
• Can find suitable properties under conforming limits
• Feel uncomfortable with large debt obligations
• Have unstable or variable income
• Plan to move within a few years (closing costs may not be recouped)

Conclusion

Jumbo loans serve a vital role in real estate financing, enabling buyers to purchase homes that exceed the 2026 conforming loan limits of $832,750 (or higher in designated high-cost areas). While these mortgages come with stricter requirements—typically 700+ credit scores, 10-20% down payments, and 6-12 months of cash reserves—they've become increasingly accessible and competitively priced as lenders compete for high-value borrowers.

If you're considering a jumbo loan, start by assessing your credit profile, calculating your DTI ratio, and building the necessary reserves. Shop multiple lenders to find the best rates, since jumbo loan pricing varies significantly between institutions. For veterans and active-duty service members, VA jumbo loans offer particularly attractive terms, including no down payment requirements for those with full entitlement.

The key to jumbo loan success lies in preparation. Get your finances in order well before you start house hunting, and work with lenders who specialize in jumbo products in your target market. With proper planning and strong qualifications, a jumbo mortgage can be an effective tool for financing your next home—even in the nation's most expensive real estate markets.

Frequently Asked Questions