Your home reflects who you are, and it can transform or support that identity. Winston Churchill once remarked, “…we shape our buildings, and afterwards, our buildings shape us.”

Is it any wonder that we often want the best and biggest for where we spend our lives? If that sounds like something you are looking to achieve, you should know about jumbo loan limits.

Jumbo loans are a major component of the mortgage market, especially for high-value properties. Understanding conventional loan limits—a specific government threshold—is essential for potential borrowers who aim to finance a luxurious home or one in a high-value area.

What are the details of jumbo loans? What are jumbo loan limits about? What are their benefits and drawbacks? What is the application process?

Keep reading to find out.

What is a jumbo loan?

A jumbo loan is a type of mortgage designed to finance properties that exceed the conforming loan limits set by the Federal Housing Finance Association (FHFA).

• Conforming loans: If your loan amount falls below the set maximum loan limits, it means the loan is eligible for purchase by specific government-sponsored enterprises (GSEs) .
• Jumbo loans: These mortgage loans surpass the maximum loan limit and are not eligible for GSE purchase, which means lenders take on greater risk and often impose stricter qualification requirements.

Note: The two GSEs involved are ones you might have heard of—Freddie Mac and Fannie Mae.

Differences from conventional loans

Conventional loans always conform to the maximum loan limits. Any loan amount that goes above that limit is considered a jumbo loan and could also be called “non-conforming” or “non-conventional.”

Additionally, non-conventional loans may require:

• Higher credit scores
• Larger down payments
• More extensive documentation

Interest rates on non-conforming loans like jumbo loans can also be a bit higher due to the increased risk to the lender.

Current jumbo loan limits

As of 2024, the conforming loan limit for single-family homes in most parts of the United States is $766,550. Any mortgage exceeding this amount is classified as a jumbo loan. However, these limits are not uniform across the country and can vary based on the cost of living in different regions.

High-cost locations

Several factors influence jumbo loan limits, but the biggest one is whether the property is located in a high-cost area of the country.

High-cost areas—e.g., San Francisco, New York City and parts of Los Angeles—have higher loan limits to accommodate the more expensive real estate markets. The limits are adjusted annually based on changes in the average home prices across the country.

Property types

The property type being financed can also affect the limits.

For example, multi-unit properties such as duplexes or fourplexes have higher limits compared to single-family homes. Additionally, some regions with exceptionally high housing costs have special high-balance conforming limits that fall between standard conforming and jumbo loan limits.

Advantages of jumbo loans

1. Financing for high-value homes: Jumbo loans can become essential when a mortgage is needed  to purchase a luxury home or property which exceeds conforming loan limits.
2. Flexible loan terms: Borrowers can often choose from a variety of loan terms and interest rate structures, including fixed- and adjustable-rate options.
3. Investment opportunities: For real estate investors, jumbo loans provide the necessary capital to acquire high-value investment properties that can yield substantial returns.

Potential drawbacks and risks

1. Stricter qualification requirements: Due to a likely increased risk, lenders impose more stringent requirements on jumbo loans, including higher credit scores and larger down payments.
2. Higher interest rates: Although it’s not the same in every case, jumbo loans may sometimes come with higher interest rates in comparison with conventional loans, increasing the overall cost of the loan.
3. Greater financial scrutiny: Borrowers must provide extensive documentation to verify income, assets and employment.

Qualifying for a Jumbo Loan

Qualifying for a jumbo loan involves meeting several criteria.

Income and credit score requirements

Credit score minimums

A higher credit score usually helps secure a better interest rate.

Income

Borrowers must demonstrate a high and stable income to support the larger loan payments. Lenders typically require extensive proof of income, such as tax returns, W-2s and bank statements.

Down payment expectations

Jumbo loans typically require a larger down payment than conforming loans.

Conforming loans might permit a down payment as low as 3% while jumbo loans often have a 20% down payment requirement.

In some cases, lenders might accept a smaller down payment, but this usually comes with higher interest rates.

How to apply for a jumbo loan

1. Research lenders: Not all lenders offer jumbo loans, so it’s crucial to identify those that specialize in high-value mortgages.
2. Pre-approval: Start with a pre-approval process to determine how much you can borrow.. (Remember: Pre-approval is only a first step. Set your sights on Get Committed®, a unique program from Compass Mortgage which offers a fully-approved loan commitment even before you find a home you wish to buy.)
3. Complete application: Submit a detailed mortgage application, including extensive documentation of your income, assets and credit history.
4. Underwriting: The lender’s underwriting team reviews your application and verifies the provided information.
5. Closing: Once approved, you’ll proceed to the closing process to finalize the loan and purchase the property.

Necessary documentation

Applying for a jumbo loan requires thorough documentation. Commonly requested documents include:

• Proof of identity (e.g., driver’s license, passport)
• Recent pay stubs and tax returns
• Bank and investment account statements
• Detailed list of assets and liabilities
• Employment verification

Jumbo loan limits: The bottom line

If you are looking for a  mortgage that is above the conforming loan limit, jumbo loans are a vital financing option you need to know about.

If you’re not sure what sort of mortgage fits with your homebuying plans or budget, consult with the professionals at Compass Mortgage. Jumbo loan limits don’t mean your dream of homeownership is limited as well.

Reach out to us right now, and we can start exploring your options to ensure you find the best home loan to meet your needs and achieve your homeownership goals.

Apply with Compass Mortgage today—unlock your full range of loan options.