Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.
Conventional vs. jumbo loans
Which home financing option is better ultimately depends on your property's cost.
Jumbo loans enable you to borrow much more than conventional loans. But they can be more difficult to qualify for and typically come with higher interest rates.
How do conventional loans differ from jumbo loans?
Conventional loans differ from jumbo loans in key ways that include how they’re backed and how much property you can buy with them.
A conventional loan is a home loan that isn’t guaranteed or secured by the federal government. Rather, it’s backed by private lenders like banks, mortgage companies and credit unions.
Not all conventional loans are conforming — that is, privately funded without government backing. But most are, which makes them subject to conforming loan limits.
In 2019, the limit on conforming loans is $484,350, though some of the nation’s top housing markets — like Alaska and Hawaii — allow for conventional loans as high as $726,525.
A jumbo loan offers a way to finance more expensive properties. Generally, it becomes an option if your property exceeds the limits for conforming loans.
Given their size, jumbo loans are considered a riskier loan for lenders. Expect higher interest rates, larger down payments and stricter underwriting than conventional loans.
Conventional vs. jumbo loans
|Conventional loan||Jumbo loan|
|Maximum loans||$484,350 and up to $726,525 in high-cost areas||Up to $3 million|
|Interest rates||Generally 3.75% to 4.89%||Generally 0.5% to 1.5% higher than a conventional loan|
|Minimum down payment||As low as 3%||As low as 10% but typically at least 20%|
|Repayment terms||Up to 30 years||Up to 30 years|
Learn more about Conventional loans
Learn more about Jumbo loans
Benefits and drawbacks of conventional loans
- Lower interest rates
- Lower qualifying credit scores
- Down payments as low as 3%
- Typically limited to $484,350
Compare conventional mortgage lenders
Benefits and drawbacks of jumbo loans
- Significantly higher loan limits
- Higher interest rates
- Greater market risk
- Stricter credit requirements
- Difficult to refinance
Compare jumbo mortgage lenders
Which option is better suited for me?
Jumbo loans offer one convenient payment for luxury or high-value properties. Sometimes it’s worth having one house payment without juggling multiple mortgages.
However, a conventional loan typically comes with less stringent requirements and can offer stronger rates.
If your credit score is lower than 650 or you’re on the cusp of the $484,350 conventional loan limit, it may be worth piggybacking loans or multiple mortgages. By splitting your loan amount among multiple lenders, you can circumvent some of the strict requirements of a jumbo loan.
Buying a home is no small undertaking. But you have several ways to finance your purchase, no matter its cost.
As with any major purchase, shop around and weigh your options when deciding whether take out a jumbo loan.
Frequently asked questions
Ask an Expert