Jumbo Loans: The Super-Sized Mortgages for More Expensive Homes

For most states that maximum was $766,550 in 2024 for conforming loans, as determined annually by the Federal Housing Finance Agency. Mortgages above that amount generally venture into jumbo territory.

However, in pricier housing markets, including in New York City, Los Angeles and all of Hawaii, the max that borrowers may receive for a conforming loan is $1,149,825. Borrowers seeking even larger loans in those areas may want to consider jumbo loans.

“Taking out a jumbo loan [may not be] a choice,” said Yvette Masi, a New American Funding loan consultant based in Brentwood, Calif. “You [may] have to get it if you need it to buy your house.”

Why jumbo loans may be a good fit for some homebuyers

Like anything else in life, there are advantages and disadvantages to taking out a jumbo loan.

Jumbo loans can be used for more than just the home that you live in. Buyers can take out fixed-rate or adjustable-rate jumbo loans to finance their primary home, investment property, or even a vacation home.

One perk is these loans have typically offered lower mortgage rates than other loans—despite the loans not being backed by Freddie Mac or Fannie Mae due to their larger size. 

“Because they are very large loans, lenders use lower rates to entice these types of clients,” said Masi.

However, lately the reverse has been true with jumbo rates higher than those for conforming loans.

Jumbo loans may offer more non-traditional mortgage options. This includes mortgages for self-employed buyers who provide 12 and 24 months of bank statements or one year of tax returns in some instances. 

And while many buyers may think they need to put down 20% of the sale price of the home to secure a jumbo loan, they may only need 10% to 15% down. But borrowers may need to pay private mortgage insurance (PMI) if they don’t contribute that 20%.

Even if you have enough cash to avoid taking out a jumbo loan, you may want to consider one to save on taxes. For example, if you need to withdraw money from an investment account to come up with the funds, this may trigger capital gains taxes.

The downsides to getting a jumbo mortgage

Jumbo mortgages are similar to conforming loans, but there are some key differences that may make some buyers want to reach deeper into their savings accounts or find less expensive properties to purchase.

The application process for a jumbo loan may be more rigorous than for other types of loans. That’s because unlike conforming loans, jumbo mortgages aren’t insured by Fannie Mae or Freddie Mac. So, buyers must prove to lenders that they are, indeed, good risks.

Lenders may ask for additional years of tax returns and bank statements and as well as other documentation that those applying for a conforming loan may not need to provide.

That’s because lenders want to make sure borrowers will be able to repay these loans. Lenders generally expect credit scores of at least 680, a debt-to-income ratio of no more than 45%, and in some cases, ample cash reserves to cover six months to a year of mortgage payments.

“In some cases, lower debt-to-income ratios are required,” said New American Funding loan officer Robert Bachman. He is the branch manager for the Los Gatos, Calif. office.

Jumbo loans may also require a larger down payment on the home, usually at least 10% of the purchase price, although that may be higher. Smaller, conventional loans allow some buyers to put down as little as 3%.

In addition, borrowers may be required to foot the bill for more than one appraisal to assure the lender that the property really is worth the sales price.

“You should have a strong credit profile, strong reserves in liquid accounts, and a strong income and employment history,” said Masi.

Yvette Masi NMLS # 849520

Robert Bachman NMLS #256297