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Jumbo Loans vs. Conventional Loans

When investing in your mortgage, it is always important to compare your options. Every loan has different requirements you should consider when finding the best option for you.

So, what is the difference between a Jumbo Loan and a Conventional Loan?

Conventional Loans

Conventional loans are the most common mortgages available. Conventional loans are split into conforming and non-conforming loans. Their limits are set by looking at the total sum of the loan and the way it corresponds with FHFA guidelines. The maximum amount varies depending on the area.
This particular loan may be the right choice for future homeowners with a high credit score and enough savings to afford a higher down payment. There is a certain flexibility when it comes to the down payments on these mortgage loans, the most common one being 20%, but some conventional mortgage loans require only a down payment of as little as 3%.
Generally, conventional loans run for 30 years, but there are also some that run for 15 or 20 years. It all depends on the repayment plan agreed upon when first signing. The guidelines either fall under FHFA regulations if the loan is conforming or will be agreed upon by the lender if it is non-conforming.

Jumbo Loans

Jumbo loans’ sum is significantly larger than its conventional counterpart. According to the Federal Housing Finance Agency (FHFA), you may need a jumbo loan if your borrowing need exceeds the local conventional loan limit.
The average limit is around $510,400, and anything above that amount puts you in jumbo loan territory, however, the requirements when applying for a jumbo loan are stricter than conventional ones. Your lender will assess your credit score, debt-to-income ratio (DTI), your cash reserves, etc. before providing a jumbo loan, because of the high risk involved for them.

When applying for a Jumbo loan, you should prepare for higher closing fees because of the extra steps involved in administrative and legal processes. They also feature higher interest rates and greater monthly repayments. With this in mind, jumbo loans are reserved for those with a much bigger budget.


Let us know if you want to take a closer look at your specific scenario. We’ll be glad to help!

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