A jumbo mortgage is any mortgage that is for an amount higher than your area’s conforming limit. Conforming loan limits matter because they are used to determine which loans are eligible to be purchased by Fannie Mae and Freddie Mac.2

When you apply for a jumbo loan, the process is the same as any other mortgage. The loan goes through an underwriting process in which the lender looks at your credit score, debt-to-income ratio, and other financial factors. The key difference is that with a jumbo loan, lenders have stricter requirements because the amount you’re borrowing is much higher. For example, applicants might have to meet additional eligibility criteria, such as having larger cash reserves or providing extra documentation.

Jumbo mortgage borrowers also usually have higher closing costs, and you might have to make a larger down payment than is required with some other types of home loans. There are different term lengths available on jumbo loans, with 30-year mortgages being the most common. They have either fixed or adjustable rates.

If you’re looking to purchase an expensive home, you may need a jumbo mortgage to borrow more than the conforming loan limits allow. Jumbo mortgages aren’t accessible to everyone who wants to buy a luxury home, however. Borrowers must be able to demonstrate that they have strong credit and ample income and assets to afford the monthly payment.

Because lenders are taking on more risk, jumbo loans typically have higher qualification standards than conforming loans. Qualifications may vary by lender, but you expect a higher credit score requirement than you’d need for a conventional or government-backed loan.

One major benefit of jumbo mortgages is that you have a financing option without having to limit your home search by price. This can be especially advantageous in areas where home prices run high.

In addition, because you have to meet tougher standards, jumbo mortgage rates tend to be comparable to and sometimes even lower than conforming loans.3

Finally, with jumbo mortgages, you may not be required to pay private mortgage insurance (PMI), which protects your lender if you default on the loan. PMI is not required on conventional mortgages if you make a down payment of 20% or if you have more than 20% equity.4 And some lenders don’t require PMI for jumbo mortgages even if the lender has lower down payment standards.5

Jumbo loans usually require higher down payments than other types of home loans. For example, while some conventional loans might require 3% down, a jumbo loan lender typically requires 20%. In some cases, you can see lower down payment requirements for jumbo loans, such as 10%.

VA-backed home loans have no limits on the amount you can borrow, as long as you meet income and credit history requirements, and they don’t require a down payment.6

If a mortgage is conforming, it means that it is within the loan limits and meets other criteria set by Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA). Fannie and Freddie purchase conforming loans from lenders.

In general, if a mortgage amount is less than the loan limits, it is considered a conforming loan. Loans above that limit are jumbo mortgages.

Jumbo mortgage rates are competitive and can even be lower than some conforming mortgage rates. However, your personal financial situation will ultimately determine the jumbo mortgage rates you qualify for. Shop around and compare different loan options, because rates can vary by lender.

Qualifying for the best jumbo mortgage rates—or any loan rates, for that matter—depends heavily on your financial health. The main factors the lender will consider include:

• Credit score: A higher credit score demonstrates a more responsible credit user, so lenders will offer you lower rates.
• Debt-to-income ratio: The lower your debt-to-income ratio (DTI), the more confident the lender will feel that you have the ability to make your loan payments.
• Down payment: The more you put down, the more equity you will have in the home. Putting down a large amount of cash often leads to lower rates.

Once you’re confident in your financial standing, try to get quotes from a few lenders to ensure you’re getting the best possible jumbo mortgage rates for your current situation.