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Jumbo Loans vs. Conventional Loans: Which One is Right for You?

Dekoven Wesley


If you are considering purchasing a larger house, you may have come across two home loan options: jumbo loans and conventional loans. When it comes to choosing the right mortgage product for your dream home, several factors can have an impact on your decision. 

So, let's take a deeper look at the differences between jumbo loans and conventional loans so you can make a smart choice that best meets your and your family's needs. 

Jumbo Loans and Conventional Loans—The Details 

A jumbo loan is a type of mortgage that offers amounts greater than the conforming loan limit as stated by Fannie Mae and Freddie Mac. (For reference, a conforming loan limit is the maximum amount someone can borrow under a specific mortgage loan.) Jumbo loans help borrowers finance high-priced properties that require more significant loan amounts. 

Conventional loans are mortgages that fall within the conforming loan limits stated by Fannie Mae and Freddie Mac. They are considered a more "traditional" type of loan and are used to finance properties that require lower to average loan amounts. 

So, what are the differences? Let's dive in. 


jumbo loans vs conventional loans, 6 differences

6 Differences Between Jumbo Loans and Conventional Loans 

  • Loan Amount 

  • Credit Score Requirements 

  • Down Payment 

  • Interest Rate 

  • Debt-to-Income Ratio 

  • Documentation Requirements 

Loan Amount for Jumbo and Conventional Loans 

As mentioned above, jumbo loans are used for purchases above the conforming loan limits set by Fannie Mae and Freddie Mac. These limits vary by location and are set yearly by the Federal Housing Finance Agency or the FHFA.  

Depending on each lender, the loan limit may vary, but in most parts of the US, you may need to apply for a jumbo loan if you want to borrow more than $766,550 (as of 2024.) In contrast, conventional loans are for purchases under—or up to—that figure.  

Credit Score Requirements 

Jumbo loans generally require borrowers to maintain a high credit score —typically of at least 700 to qualify. On the other hand, applicants for conventional loans may attain approval with a lower score, around 620.  

One of the reasons why conventional loans are more flexible when it comes to borrower's credit scores is because the government does not back these types of loans. As a result, conventional lenders can—and have to—set their own underwriting standards and requirements for borrowers. In contrast, government-backed loans often have stricter guidelines and requirements.  

jumbo loans vs conventional loans, down payment differences

Down Payment for Jumbo Loans 

Jumbo loans can require a more substantial down payment than conventional loans. Often, a minimum of 20% of the home's purchase price is needed to qualify for a jumbo loan.  

Moreover, while financial experts also recommend putting down 20% on a conventional loan, applications often accept a lower down payment—sometimes as low as 3%.  

It's important to note that while a lower down payment makes it easier to purchase a home, it may also result in higher monthly mortgage payments or additional fees. 

Interest Rates for Jumbo Loans vs Conventional Loans 

When compared to conventional loans, jumbo loans tend to have higher interest rates because the large loan amounts pose a higher risk to lenders. The higher interest rates on jumbo loans can result in higher monthly mortgage payments for buyers because they increase the cost of borrowing, which adds up over time. It's important to note that current market conditions also affect interest rates, and lenders don't often have the control to lower these figures. 

Debt-to-Income Ratio 

Lenders want to ensure borrowers can handle the higher monthly payments of jumbo loans, so these loans often have stricter debt-to-income (DTI) ratio requirements than conventional loans. Lenders may require a maximum debt-to-income ratio of 43% to 50% or less for jumbo loans, compared to the maximum DTI ratio of 50% to 60% for conventional loans. 

Documentation Requirements for Jumbo Loans 

Jumbo loans may require more documentation than conventional loans. Most lenders require borrowers to provide financial documents such as a few years' worth of bank statements and tax returns to confirm their income and assets.  

However, additional financial documentation may be necessary for jumbo loans, including asset statements, employment verification, and proof of homeowners insurance. Lenders may also require a home appraisal and may verify the source of the down payment funds. 

jumbo loans vs conventional loans, mortgage expert

Get the Help You Need from Our Mortgage Experts 

The decision between a jumbo and a conventional loan will ultimately depend on your financial situation and home-buying goals. If you want to finance a higher-end property, a jumbo loan may be your right choice. However, a conventional loan may be a better fit if you're looking for more flexibility in loan amount and terms.  

Would you like to start the pre-approval process for a jumbo or conventional loan? Click here to get in touch with a mortgage professional today. The Mortgage Minds Group is here to make your home-buying dreams an easy reality! 

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