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What Is a Jumbo Loan?

What you'll learn: Gain an understanding of what budget you’re looking at in your home search


A jumbo loan is a loan that exceeds the amount available for a conventional conforming loan. One of the key aspects of a conforming loan is that it has a limit on the amount that you can borrow. Conforming loans have rules that describe how you can qualify for a mortgage, how much you can borrow, and how the lender may structure the loan. Freddie Mac and Fannie Mae, the federally backed mortgage companies created by Congress, set these rules. 

Sometimes jumbo loans are called non-conventional conforming loans. That basically means neither Freddie Mac nor Fannie Mae guarantee the loans, which makes them riskier for lenders. Lenders typically offer jumbo loans for fixed rate or adjustable rate mortgages (ARMs). Jumbo loans often carry a higher interest rate than a conventional conforming loan, because ultimately they are riskier for the lender than a conforming loan.

How do I qualify for a jumbo loan?

It can be harder to qualify for a jumbo loan because the loan amount exceeds the county loan limits established by Fannie and Freddie. Across the board, the criteria lenders use to see if you qualify are generally stricter and include:

  • A higher credit score compared to a conventional conforming loan
  • More cash in the bank for a down payment and as reserve

What is the credit score I need for a jumbo loan?

How high your credit score needs to be depends on various factors that vary from lender to lender. Typically, you’re going to need a credit score above 700 or even 720. Again, the better your credit score, typically the better your interest rate.

What are some of the benefits of a jumbo loan?

For the most part, the biggest benefit is that a jumbo loan allows you to purchase a home with a larger loan amount compared to a conventional conforming loan. 

If you live in an area where housing is at a premium, you may need to consider a jumbo loan, unless you have a lot of money available for a down payment.

What are the downsides of a jumbo loan?

Compared to a conventional conforming loan, jumbo loans may have some downsides. A jumbo loan: 

  • May require a larger down payment
  • May have higher interest rates
  • May have higher closing costs and fees
  • May require additional assets
  • May require additional appraisals
  • Could take longer to secure

A loan officer can explain these different types of loans and help you determine which types you qualify for.

To learn more about what loan is right for you:


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