JUMBO
Loan Limits

A jumbo mortgage is a type of home loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These conforming limits determine the maximum loan amount that government-sponsored entities like Fannie Mae and Freddie Mac can purchase or guarantee. When a mortgage surpasses this limit, it is considered “jumbo” and is not eligible for government backing, making it riskier for lenders and potentially more expensive for borrowers.

Understanding Conforming Loan Limits
Each year, the FHFA sets the conforming loan limits based on home price data. For 2025, the baseline conforming loan limit for a single-family home is $806,500 in most parts of the United States, although this amount can be higher in certain high-cost areas, where limits can reach as much as $1,209,750.  These high-cost limits reflect the elevated real estate values in certain markets such as New York, San Francisco, and Los Angeles.

When a mortgage exceeds these amounts, it becomes a jumbo loan, which often comes with different qualification standards and interest rates.

 How Jumbo Loans Differ from Conforming Loans
Jumbo loans typically require larger down payments, higher credit scores, and sometimes more stringent debt-to-income (DTI) ratios due to the increased risk associated with them. Since these loans aren’t eligible for purchase by Fannie Mae or Freddie Mac, lenders take on more risk, which can affect loan terms in a few ways:

– Higher interest rates: While the gap between jumbo and conforming loan interest rates has narrowed in recent years, jumbo loans often still carry slightly higher rates to compensate for the additional risk.

– Larger down payments: Borrowers of jumbo loans may need to put down 20% or more, although some lenders offer options with lower down payments.

– More stringent qualifications: Borrowers often need a credit score of 700 or higher for a jumbo loan. Additionally, lenders may require more in reserves, typically six to twelve months of mortgage payments in the bank.

– No mortgage insurance: Unlike conventional loans, jumbo loans do not require private mortgage insurance (PMI), even if you put less than 20% down, which can be an advantage for borrowers.

Jumbo Loan Limits in High-Cost Areas
In some high-cost markets, the jumbo loan limit is much higher to reflect the increased housing prices. For instance, in areas like San Francisco or Manhattan, the conforming loan limits can rise up to nearly $1.15 million for a single-family home. This means that even larger homes in these areas can still be financed with conforming loans, but properties that exceed this limit will require jumbo financing.

Why Borrowers Choose Jumbo Loans
Borrowers typically turn to jumbo loans when purchasing expensive properties or refinancing high-value homes. These loans are especially common in housing markets where property values exceed the national average. While jumbo loans might have slightly higher interest rates and stricter approval criteria, they provide a solution for financing homes that exceed conforming loan limits.

Additionally, as home prices continue to rise, particularly in urban centers, more borrowers are finding themselves in need of jumbo financing simply due to market conditions. As such, many lenders have become more competitive, offering jumbo loans with terms that are not drastically different from conventional loans.

Jumbo loans allow buyers to finance homes that exceed the conforming loan limits, which is essential in many high-cost real estate markets. Jumbo mortgage loan limits define the threshold beyond which borrowers must secure a jumbo loan rather than a conforming mortgage. These loans are essential for purchasing higher-priced properties but come with more stringent qualifications and sometimes higher costs. Understanding these limits and the differences between conforming and jumbo loans can help borrowers make more informed decisions, particularly in competitive real estate markets where home prices frequently exceed the conforming loan cap.