An important part of buying a house is choosing the right mortgage. Most buyers prefer a conventional loan, which can be conforming or non-conforming. Conforming loans have specific requirements, including a maximum loan amount. Buyers who need to borrow more need a jumbo loan. Learn more about the differences between these mortgages to choose the best one for you.
Key Takeaways:
- Conventional loans are the most common type of mortgage and can be conforming or non-conforming.
- Jumbo loans are non-conforming loans that exceed the maximum loan limit for conforming loans.
- Jumbo loans allow buyers to purchase more expensive homes but require borrowers to meet stricter eligibility requirements.
What Is A Conforming Loan?
A conforming conventional loan is a mortgage that meets specific federal requirements, including a maximum loan amount and a minimum down payment. Lenders can sell conforming loans to Fannie Mae or Freddie Mac, which makes these loans less risky to offer.
The principal on a conforming loan must be less than the limit set each year by the Federal Housing Finance Agency based on average home values in the United States. The FHFA sets a baseline loan limit that applies to about 95% of counties in the U.S. and a high-cost area limit for counties where housing is more expensive. The limits apply to homes with up to four units. The FHFA website includes an interactive map showing which limits apply in each county.
Conforming Loan Limits For 2025
| Number of Units | Baseline Limit | Baseline Limit High-Cost Area Limit |
|---|---|---|
| 1 | $806,500 | $1,209,750 |
| 2 | $1,032,650 | $1,548,975 |
| 3 | $1,248,150 | $1,872,225 |
| 4 | $1,551,250 | $2,326,875 |
Conforming loans also require borrowers to have:
- A credit score of at least 620.
- A debt-to-income ratio of 45% to 50% or lower.
- A down payment of at least 3%. Borrowers who put down less than 20% of the purchase price must pay for private mortgage insurance.
You can use a conforming loan to buy a primary residence, second home or investment property.
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What Is A Jumbo Loan?
A jumbo loan is for buyers who need to borrow more than the conforming loan limit and usually is used to buy a more expensive home.
As a non-conforming loan, lenders can’t sell jumbo loans to Fannie and Freddie. Since they take all the risk on jumbo mortgages, lenders can set their own rules and often have stricter eligibility criteria.
While there’s no industry standard, you can expect mortgage lenders offering jumbo loans to want borrowers to have:
- A credit score of at least 700.
- A DTI ratio no higher than 45%.
- A down payment of at least 10%.
- Up to 12 months of cash reserves.
Jumbo Vs. Conventional Loan: A Comparison
The mortgage process is similar for getting a conforming loan or jumbo loan. However, requirements can vary based on your lender, location and financial situation. Here’s how the requirements stack up when comparing a conforming loan vs. jumbo loan.
Loan Amount
The key difference between a conforming conventional loan and a jumbo loan is that a jumbo loan is used for properties that exceed conforming loan limits. Because you borrow more with a jumbo loan and it can’t be sold to Fannie or Freddie, it’s riskier for lenders. You’ll typically face stricter lending requirements for a jumbo loan than a conforming loan.
Property Type
Both conforming and jumbo loans can be used to buy a primary residence, vacation home or investment property.
Interest Rates
Both jumbo and conforming loans are available with a fixed or adjustable rate. Market trends, your credit score and down payment largely determine your mortgage rate.
Historically, when comparing jumbo mortgage rates vs conventional rates, jumbo loans have been as much as one percentage point higher. However, the gap has narrowed as rates have increased in recent years.
While you’re borrowing more money with a jumbo loan, borrowers who can afford jumbo loans typically have more financial resources to offset the increased risk.
Minimum Down Payment
Conforming loans require a down payment on a one-unit home of at least 3% for a fixed-rate loan and 5% for an ARM. You can expect to need a down payment of 10% to 25% for a jumbo loan. Since minimum down payments are a percentage of the purchase price, a down payment on a jumbo loan will require a significantly larger sum.
Minimum Credit Score
You need a score of at least 620 to get a conforming loan. Lenders often require a score of at least 700 to get a jumbo loan.
Maximum DTI Ratio
Your debt-to-income ratio shows how much of your income is earmarked for debt payments. Jumbo loans typically come with stricter DTI requirements. To get a conforming loan, your DTI ratio normally can’t exceed 50%. The maximum DTI ratio for a jumbo loan varies by lender but typically is between 36% and 45%.
Cash Reserves
Conforming loans require no cash reserves if you’re buying a one-unit primary residence. Jumbo loans pose more risk to lenders, so they may require you to have at least a year of loan payments saved up.
Private Mortgage Insurance
If you’re taking out a conforming loan with a down payment of less than 20%, then you’ll need to pay for private mortgage insurance until you reach 20% equity. Mortgage insurance is not always required for jumbo loans, but that’s often because the down payment requirement may already be 20%.
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Conforming Vs. Jumbo Loan: Which One Is Right For You?
Different types of home loans are available for various scenarios, so you’ll want to weigh the pros and cons of jumbo and conforming conventional loans before choosing one.
You’ll likely need a jumbo mortgage in the following cases:
- You want to buy a large, luxury property.
- You want to finance a home in a high-cost or hyper-competitive area.
- You have a high credit score and income.
- You want to buy a high-cost vacation home.
A conforming loan may be a better fit if:
- You need a loan below the conforming loan limit.
- You have good credit.
- Your income is good, but it’s not enough for a jumbo loan.
You can ask your lender about other financing options, such as Federal Housing Administration loans, Veterans Affairs loans and U.S. Department of Agriculture loans.
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FAQ
Here are answers to some frequently asked questions about jumbo and conforming loans.
The Bottom Line
If you need a bigger mortgage than conforming limits allow, consider applying for a jumbo loan. If you meet the lending criteria, you can buy a home with all the features you need and want. But dream homes come in all sizes and prices. You may be able to afford a great home with a conforming conventional mortgage. The choice comes down to the kind of home you want and your financial situation.
Miranda Crace contributed to the reporting of this article.
Rory Arnold
Rory Arnold is a Los Angeles-based writer who has contributed to a variety of publications, including Quicken Loans, LowerMyBills, Ranker, Earth.com and JerseyDigs. He has also been quoted in The Atlantic. Rory received his Bachelor of Science in Media, Culture and Communication from New York University. He also completed the SoFi/Coursera Fundamentals of Personal Finance Specialization consisting of five courses: Introduction to Personal Finance, Saving Money for the Future, Managing Debt, Fundamentals of Investing, and Risk Management in Personal Finance.
