Homebuyers

Not Just for the Wealthy: Busting 4 Myths About Jumbo Loans

The term “jumbo loan” might bring images of sprawling mansions in exclusive ZIP Codes to mind. But these mortgages are not just for the ultra-wealthy.

In high-cost areas across the country, jumbo loans are an increasingly common way for average homebuyers to afford homes with not-so-average price tags.

These mortgages are used to finance homes with sales prices that exceed conforming loan limits. This means they’re not eligible to be backed by Fannie Mae or Freddie Mac, the government-sponsored enterprises that secure most U.S. mortgages.

However, contrary to popular belief, qualified buyers using jumbo loans typically don’t face sky-high mortgage interest rates and may not be required to make very large down payments.

“Jumbo [interest] rates are not necessarily higher than conforming rates,” said Lisa O’Malley, a New American Funding sales manager and senior mortgage consultant based in Northbrook, Ill. “Generally speaking, the guidelines are not as flexible as [other] loans, but there are sometimes some features that … add some flexibilities [for] the borrower.”

Below, we break down some of the most common myths about jumbo loans.  

Myth No. 1: Jumbo loans are only for wealthy homebuyers

One of the biggest misconceptions about jumbo loans is that they’re only used by the wealthy or to purchase luxury properties.

The reality? In some markets, even modest homes can be more expensive than the conforming limit set each year by the Federal Housing Finance Agency (FHFA), the government agency that oversees Fannie and Freddie.

The 2026 conforming limit is $832,750 for a single-family home in most parts of the country and up to $1,249,125 in certain high-cost areas. If you’re looking to borrow more than that to purchase a home, you’re likely in jumbo-loan territory.

“What’s unique about jumbo loans is that for those who do have a lot of [financial] assets, there are income calculations based on their assets that we can use to help qualify them,” O’Malley said.

That means jumbo loans can also be a particularly good fit for buyers such as retirees or those who inherited money or have financial investments.

Myth No. 2: You need at least 20% down to buy a home with a jumbo loan

Putting 20% down can help you avoid private mortgage insurance (PMI), which is an extra cost tacked onto your monthly mortgage payments. It can also help you to improve your loan terms.

However, down payments as low as 10% may be available, depending on your financial profile and your lender. Some lenders may require at least 20% down, while others may allow you to kick in less.

The downside to contributing less is that the amount you put down influences the mortgage interest rate you receive.

“The more you put down, the lower your rate because of the reduction in risk [to the lender],” O’Malley said.

Myth No. 3: Jumbo loans have high interest rates

Many homebuyers believe jumbo loans have higher mortgage interest rates than some other types of popular loans.

Jumbo loans tend to have slightly higher interest rates than conforming loans. But depending on the lender and market conditions, the difference may be negligible. 

In some competitive lending environments, jumbo rates can even be on par with or lower than conforming rates for well-qualified borrowers.

Myth No. 4: You can’t get an FHA or VA jumbo loan 

The Federal Housing Administration (FHA) and Veterans Affairs (VA) also offer jumbo loans for those who qualify. However, borrowers should note that eligibility and other requirements may vary from conforming FHA and VA loans.

For example, an FHA jumbo borrower might need a higher credit score compared to the 580 minimum for regular FHA loans.

And while VA jumbo loans still offer a $0 down option, purchase prices exceeding $1.5 million require a down payment.

What to know before you apply for a jumbo loan

The approval process for jumbo loans is often more stringent than for other types of loans. This is because these are larger loans that don’t have the backing of Fannie Mae or Freddie Mac, which translates into more risk for lenders.

Expect to provide detailed documentation of your income, assets, and debt. A minimum credit score of 680, a solid debt-to-income ratio (how much you earn compared to how much debt you have), and six months or more of cash reserves are among the qualifications that lenders typically seek.  

O’Malley also noted that today’s buyers may qualify for jumbo loans more easily than in the past thanks to changes in how some mortgage investors carry out the underwriting process that determines whether borrowers will be approved for loans.

Not sure whether you qualify for a jumbo loan?

“It all points to really doing that [mortgage loan] pre-approval,” O’Malley said. If issues come up during the pre-approval process, your lender can help “address them quickly and hopefully within the timeline that [buyers] want.”

Lisa O’Malley NMLS# 223811