Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
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MORTGAGE
Jumbo vs. Conventional Mortgages: Key Differences to Know
What you'll learn: What to know about the differences between jumbo and conventional loans.
EXPECTED READ TIME: 3 MINUTES
June 18, 2025
The first step to buying a home is deciding you are ready to become a homeowner. One of the next steps is choosing the right type of mortgage. Though there are quite a few home loan options available on the market, we will be exploring the differences between two of them: Jumbo loans and conventional loans.
What defines each type of mortgage?
Before breaking down the differences, it is important to first explain each type of mortgage:
Conventional mortgage
A type of home loan that falls within the conforming loan limits that are set by entities like Fannie Mae and Freddie Mac. Unlike Veterans Affairs (VA) loans and Federal Housing Administration (FHA) loans, conventional mortgages are not insured or guaranteed by the federal government. Typically, they are used by qualifying borrowers to purchase primary residences, second homes, or investment properties.
Jumbo loan
Jumbo loan amounts are allowed to exceed conforming loan limits. Since they fall outside of conforming loan limits, jumbo loans are considered riskier for lenders and often have much stricter borrower requirements compared to other home loan options.
The major difference: loan limits
The clearest distinction between jumbo and conventional mortgages are the loan amounts or sizes.
The Federal Housing Finance Agency (FHFA) determines the conforming loan limits each year. As of 2025, these limits have increased. The current baseline limit for a single-family home in most U.S. counties is $806,500 (a 5.2% increase from 2024). In more expensive zip codes (for example, Hawaii) the limit is set to $1,209,750.
Any mortgage or loan amount that exceeds the conforming loan limit for a given area is considered to be a jumbo loan. Because of this, jumbo loans are often used for the purchase of luxury homes or in high-cost real estate markets. Alternatively, conventional loans must stay within the FHFA’s loan limits.
Qualification requirements
Due to their differences, the borrower qualifications you must meet differ greatly between jumbo and conventional loans. Because of their size and the potential risk to lenders, jumbo loan requirements are often much stricter.
Here is a comparison between the various qualifications for each loan type:
|
Requirements |
Jumbo Loan |
Conventional Loan |
|
Loan amount |
Above conforming limit |
$806,500 or less |
|
Typically, 700, often need 720 or higher (depending on your lender) |
Minimum of 620 is most often required by lenders | |
|
10% to 20% or more |
As low as 3% to 5% | |
|
Max 43% (varies by lender) |
Typically, up to 50% (depending on your lender’s requirements) | |
|
Cash reserves |
6 to 12 months of mortgage payments available |
1 to 2 months, but not often required |
|
Appraisal |
May require up to 2 appraisals |
One standard appraisal |
|
Income documentation |
Standard mortgage documentation (lenders may require added documents to confirm assets and cash reserves) |
Standard mortgage documentation |
|
Not required, but a higher down payment amount is expected |
Private mortgage insurance (PMI) only required if down payment is less than 20% | |
|
Property type limits |
Primary residences, vacation homes, and investment properties allowed |
Primary residences, vacation homes, and investment properties allowed |
Cost comparison
Jumbo and conventional loans also differ in their total costs. Here is how they stack up:
-
Interest rates: Jumbo loans typically have slightly higher interest rates than conventional loans, although in some market conditions, the difference can be negligible or even reversed.
-
PMI: Conventional borrowers who put down less than 20% typically pay PMI. Many jumbo loans do not require PMI, but they offset the risk with stricter approval criteria.
-
Closing costs: Jumbo loans may also come with higher closing costs due to their larger size and more extensive underwriting process.
Due to the difference in loan sizes, your monthly mortgage payments will also vary depending on which mortgage you choose. Take a closer look at an example of monthly payment differences:
|
Loan type |
Loan amount |
Interest rate |
Down payment |
Monthly payment* |
|
Conventional |
$750,000 |
6.375% |
20% ($150,000) |
$3,743 |
|
Jumbo |
$900,000 |
7% |
20% ($180,000) |
$4,790 |
*Monthly payment estimates are based on principal and interest only, over a 30-year term.
Who should consider each mortgage option?
There are a number of differences between conventional and jumbo loans, so it is important to consider your personal circumstances when deciding which mortgage type is right for your homebuying needs.
A conventional loan may be your best option if:
-
You are buying a home within the conforming loan limits
-
You want flexible down payment options
-
You prefer simpler qualification requirements and potentially lower closing costs
On the other hand, a jumbo loan may be the better choice for you if:
-
You are purchasing a high-value home that exceeds the conforming limits
-
You have excellent credit, substantial income, and can afford a larger down payment
-
You are buying in a high-cost area where property values regularly exceed conforming limits
Conventional and jumbo mortgages may be different, but both options can offer you a path to homeownership. The right home loan for you will depend on a number of factors, including your loan size, financial profile, and long-term goals.
Talk to the experts
Before you decide which mortgage is best for you, it is important to take the time to evaluate your budget and consider housing prices in the area you are searching for your home.
It can also be helpful to speak with a trusted lender or mortgage expert. They will be able to walk you through all of your homebuying options so you can feel confident in your decision as you enter the market.
SIMILAR ARTICLES
Can I Afford a Jumbo Loan?
Discover what it takes to get a jumbo loan and whether or not it fits into your budget. A jumbo mortgage could be the best choice in today's market.
Understanding Jumbo Loan Rates
Jumbo loan interest rates can vary based on credit, income, down payment or equity, and property type. Learn how to get the best jumbo loan interest rates.
What Are the Different Types of Mortgages?
There are different types of mortgages for all financial situations. PenFed Credit Union provides details on different mortgages and which might be right for you.
How Much Mortgage Can I Afford?
Get your home loan financing questions answered, including: Can I afford a mortgage? How much home can I afford? Can I afford to buy a home?
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.25 discount point, which equals 1.25 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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