Jumbo Mortgages

A jumbo loan is a type of mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These limits vary by location, but in most parts of the United States, the conforming loan limit is now $802,650. In high-cost areas, like parts of California or New York, the limit can be higher, often above $1 million. Jumbo loans allow buyers to finance homes that exceed conforming loan limits without needing to secure multiple smaller loans.

Because jumbo loans exceed the conforming loan limits, they are not eligible to be purchased or guaranteed by the government-sponsored entities that back most conventional loans. This makes jumbo loans riskier for lenders and will often result in a slightly higher interest rate than conforming loans.

The maximum debt-to-income (DTI) ratio for a jumbo loan is often stricter than a conforming loan because of the higher risk associated with these larger loan amounts. Many jumbo loan products require a DTI ratio of 43% or less, but we do offer some jumbo loan products that allow at DTI of up to 50% with compensating factors (like cash reserves and excellent credit).

DTI is calculated by dividing total monthly debt payments (including mortgage, car loans, student loans, credit cards, and any other debt payment that appears on a credit report) by your gross monthly income. For example, if your total debt payments each month total $5,000, and you have $12,000 a month in income, your DTI ratio would be 42%.

Yes, jumbo loan interest rates are generally higher than conforming loan rates. This is because jumbo loans represent a higher risk to lenders for several reasons:

Larger loan amounts: Jumbo loans exceed the conforming loan limits, making the total loan amount larger. Lenders take on more risk in case of default because they can't sell these loans to Fannie Mae or Freddie Mac.

Non-conforming status: Since jumbo loans do not conform to the guidelines set by Fannie Mae and Freddie Mac, they aren’t backed or guaranteed by these entities. This increases the lender’s risk.

Market demand: Jumbo loans are often held in the lender's own portfolio or sold to private investors, who may demand a higher return on their investment, pushing up rates.

While jumbo loan rates used to be significantly higher than conforming loan rates, the gap has narrowed in recent years due to competition in the mortgage market. Jumbo loan rates are still generally a little higher than conforming loan rates, but the difference is not nearly as significant.

Cash reserves are considered liquid assets such as cash, savings, or easily accessible investments. These reserves are intended to show you have the financial ability to continue making monthly mortgage payments in case of an unexpected event or loss of income. Jumbo loan borrowers are often required to have enough cash reserves on hand to pay a certain number of mortgage payments after a loan closes. The specific cash reserves requirement varies by the jumbo loan product you select. 6 to 12 months of cash reserves is most common, but it could be more or less than this depending on the jumbo loan and your overall financial profile.

A jumbo loan is suitable for buyers who are looking to finance a property that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). For 2025, the national conforming loan limit is $802,650. In high-cost areas like parts of Alaska and Hawaii, this cap rises to $1,203,975. The following types of buyers should consider a jumbo loan:

Buyers in High-Cost Real Estate Markets - Buyers looking to purchase homes in areas where property prices are significantly higher than the national average may need a jumbo loan.

Luxury Home Buyers - Buyers interested in luxury properties, vacation homes, or high-end real estate are likely to need a jumbo loan, as these homes typically come with price tags that are well beyond conforming loan limits.

Buyers Looking For a Single Loan Solution - Some buyers prefer to finance their entire purchase with one loan, rather than splitting it into a conforming loan and a second loan. A jumbo loan allows buyers to finance the total amount in a single loan product.

Jumbo loans can be used to purchase high-value properties that exceed conforming loan limits, such as luxury homes, primary residences in expensive markets, and second or vacation properties. They can also finance investment properties like multi-family homes or high-end rental units, as well as condominiums in high-cost urban areas. Jumbo loans are ideal for properties located in upscale neighborhoods, coastal areas, or major cities where prices surpass the limits for standard mortgages.