Updated: October 3, 2024
Advertising & Editorial Disclosure
Jumbo loans are mortgages that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. For 2024, the conforming loan limit is $766,550 in most states (some counties have higher limits), and borrowers looking for higher-valued properties will need jumbo loans.
Jumbo loans don't have a defined upper limit — the amount you can borrow is determined by your creditworthiness and ability to repay. Understanding this can help you secure the right funding for your unique borrowing needs.
Jumbo mortgages enable borrowing beyond the conforming loan limits set for most areas.
Jumbo loans have no fixed upper limit, and borrowing amounts are determined by lenders based on the borrower's creditworthiness and financial profile.
Jumbo loan rates are influenced by multiple factors, including location, a borrower's credit score and broader economic conditions.
Jumbo loans don't have upper limits, but they do have a minimum. A mortgage becomes a jumbo loan when it surpasses the conforming loan limit, which is set each year based on the House Price Index (HPI). In 2024, the Federal Housing Finance Agency set the conforming loan limit for one-unit properties at $766,550 for most states.
Counties in California, New York and Colorado have higher conforming loan limits; in Alaska and Hawaii, the limit is $1,149,825. A jumbo loan's actual upper borrowing limit depends on lenders, who assess each borrower’s financial profile individually.
Conforming loan limits have existed for decades, but the Housing and Economic Recovery Act of 2008 expanded these limits in high-cost areas to ensure broader access to mortgages backed by Freddie Mac and Fannie Mae. These government-sponsored enterprises buy and resell most U.S. mortgages, reducing lender risk.
The FHFA adjusts these limits annually to align with real estate market trends. Jumbo mortgages, which exceed these limits, have stricter approval processes since they lack government backing and must be retained by lenders, who bear the full risk of defaults.
Choosing the right jumbo loan lender is as important as selecting your ideal home. Rushing this decision might mean missing out on better rates or terms — even a few percentage points can make a big difference on such large loans. You can achieve significant savings over your loan’s lifetime by carefully comparing different lenders’ criteria and offers and knowing the right questions to ask.
Ask your lender about the following to get a comprehensive picture of what they’re offering:
Interest Rate
The interest rate directly influences your monthly payments and the total interest paid throughout the loan's duration. A slightly lower rate could save you thousands.
Additional ees
Clarifying any additional closing costs upfront, such as origination fees or discount points, ensures you are not caught off-guard by unexpected expenses.
Loan Term
This tells you how long you'll be making payments and the total interest cost over the life of the loan. Choosing the right term can help you find a balance between keeping monthly payments manageable and reducing total interest expenses.
Prepayment Penalties
Planning your financial strategy involves knowing if there are penalties for early loan repayment. It affects your ability to refinance your mortgage or sell your home without incurring extra costs.
Also, consider the type of lender that best suits your needs. Traditional lenders often offer personalized services, while online lenders might provide a faster application process. Weigh these options based on what aspects are most important to you.
Interest rates significantly influence the overall cost of borrowing. Jumbo mortgage rates can vary based on things like your location. Use the interactive rate table below to explore and understand the rates available to you as of April 2024:
| 15-Year Fixed Rate Jumbo | 6.71% | 6.78% |
| 30-Year Fixed Rate Jumbo | 6.72% | 6.79% |
| 5-year ARM Jumbo | 6.89% | 7.75% |
| 7-year ARM Jumbo | 7.75% | 8.25% |
Besides location, various broader market elements play a role in shaping current jumbo mortgage rates. Understanding how these factors interplay can help you better anticipate changes and secure a favorable rate.
Economic Indicators
Inflation rates, employment figures and economic growth can all impact jumbo loan rates. A strong economy generally leads to higher rates because people are more willing to take out loans because they feel financially secure.
Federal Reserve Policies
As the Federal Reserve adjusts its lending rates, it frequently triggers corresponding shifts in loan rates. Keeping an eye on Fed announcements can provide clues as to where jumbo loan rates might head.
Global Economic Events
Economic conditions abroad can impact U.S. mortgage rates. For example, if investors perceive the U.S. as a safer investment compared to other markets, it can result in lower domestic rates.
Bond Market
Mortgage rates often move in the same direction as 10-year Treasury yields. If you notice Treasury yields are climbing, jumbo loan rates may follow suit.
Your Financial Profile
While it’s only one piece of the puzzle, lenders will look at your entire financial situation, not just your credit score. Your debt-to-income ratio, cash reserves and employment history can also influence the rates you're offered.
We tackled common queries to help you understand what jumbo loans entail and how they might affect your borrowing capacity.
Jumbo loans differ from conforming loans in that they have no predefined upper limit, unlike the conforming loan cap set at $766,550 for most areas in 2024. This allows lenders to provide financing for higher-value properties based on the borrower’s creditworthiness.
Jumbo loan limits are primarily influenced by the lender's risk assessment criteria rather than predefined regulations, and they vary by lender and borrowers' financial health.
There is no universal cap on jumbo loan limits. These are determined based on the borrower's creditworthiness and the lender's policies.
Jumbo loans typically have higher interest rates than conforming loans due to the increased risk lenders take on by offering larger loan amounts without government backing.
Yes, cash reserves are often necessary for a jumbo loan to assure lenders that the borrower can manage mortgage payments in case of financial upheaval. Typically, several months' worth of reserves are required.
About Zachary Romeo, CBCA
Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.
Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.
