Conventional vs. jumbo loans | finder.com

Conventional vs. jumbo loans

Which home financing is best ultimately depends on your property's cost.

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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.

Conventional loan

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 the backing of the government. But most are, which makes them subject to conforming loan limits.

The limit on conforming loans is $453,100, though some of the nation’s top housing markets — like New York and Los Angeles — allow for conventional loans as high as $679,650.

Jumbo loan

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 loanJumbo loan
Maximum loans$453,100 and up to $679,650 in high-cost areasUp to $3 million
Interest ratesGenerally 3.75% to 4.89%Generally 0.5% to 1.5% higher than a conventional loan
Minimum down paymentAs low as 3%As low as 10% but typically at least 20%
Repayment termsUp to 30 yearsUp to 30 years

Compare mortgage lenders that offer both conventional and jumbo loans

Name Product Min. down payment Origination fee
3.5%
Depends
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Vylla
Vylla
3%
Depends
Explore financing options and home shopping services all on the same website.
3%
0.5% to 1.0%
Flexible options, fast approvals and support online backed by a trusted brand.
3%
0.5% to 1.0%
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Compare up to 4 providers

Benefits and drawbacks of conventional loans

ProsCons
  • Lower interest rates
  • Lower qualifying credit scores
  • Down payments as low as 3%
  • Typically limited to $453,100

Benefits and drawbacks of jumbo loans

ProsCons
  • Significantly higher loan limits
  • Higher interest rates
  • Greater market risk
  • Stricter credit requirements
  • Difficult to refinance

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 $453,100 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.

Bottom line

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.

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