What Is a Jumbo Loan and Do You Need One?

A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac. In 2026, that's $806,500 in most areas, and up to $1,209,750 in high-cost markets.

How jumbo loans are different

Because the loan is too big for Fannie and Freddie, lenders keep them on their books or sell them to private investors. That means stricter requirements:

• Higher credit score: Most lenders want 700+, often 720+.
• Larger down payment: 10-20% is typical. Some go as low as 5-10% with great credit.
• Lower DTI: Usually capped at 43%, sometimes lower.
• More cash reserves: 6-12 months of payments in the bank after closing.
• Higher rates: Usually 0.25-0.5% higher than conventional loans.

When you need a jumbo loan

This is simple — if the house costs more than the conforming limit in your area, and you're not paying the difference in cash, you need a jumbo loan.

When you might want one anyway

In high-cost markets (San Francisco, NYC, LA, DC), jumbo loans can actually have competitive rates because lenders compete for affluent borrowers with strong credit. Don't assume jumbo = expensive.

A smart workaround

If you're close to the conforming limit, put a larger down payment to bring the loan amount under the limit. You'll get a conventional rate, and the lower rate plus smaller loan saves you twice.

The takeaway: Jumbo loans are straightforward — bigger loan, stricter rules. If you have strong credit and the income to support it, they're not as scary as they sound.