The Battle of the Rates: Jumbo Loan Rates vs Conventional


Welcome to our comprehensive guide on jumbo loan rates vs conventional mortgages. If you’re considering buying a house, you’ve undoubtedly come across these two types of loans. With the current state of the economy, it’s wise to make an informed decision about which one to use, as there are significant differences that can impact your financial future.

Jumbo loans, as the name suggests, are for larger loans, while conventional loans, which are also called conforming loans, are for smaller amounts. But other differences, such as the interest rates, fees, credit score requirements, and down payment options, play a significant role in determining which loan type is right for you.

In this article, we will provide you with an in-depth analysis of the benefits and drawbacks of jumbo loans vs conventional mortgages. So, sit tight, grab your favorite drink, and read on!

What is a Jumbo Loan?

A jumbo loan is a type of mortgage where the borrowed amount exceeds the limit set by Fannie Mae and Freddie Mac, two government-sponsored entities that purchase conforming loans. As of 2021, the conforming loan limit is $548,250 in most areas of the United States.

Jumbo loans are typically offered by private lenders and are not guaranteed by the government. Because of the larger loan amount, jumbo loans carry higher risks for lenders, which can lead to higher interest rates and stricter eligibility criteria.

What is a Conventional Loan?

A conventional loan, also called a conforming loan, is a type of mortgage that meets the standards set by Fannie Mae and Freddie Mac. These loans are backed by the government and come with a lower interest rate and more lenient eligibility requirements than jumbo loans.

Conventional loans are suitable for borrowers who want a more predictable repayment schedule and lower costs. They are also a good option for those who want to buy a more modest home or live in an area where housing prices are lower.

Jumbo Loan Rates vs Conventional: What’s the Difference?

Jumbo Loans
Conventional Loans
Loan Amount
Larger than $548,250 (depending on the area)
Smaller than $548,250 (depending on the area)
Interest Rate
Higher than conventional loans
Lower than jumbo loans
More stringent requirements (higher credit score, lower debt-to-income ratio)
Less strict requirements (lower credit score, higher debt-to-income ratio)
Down Payment
Usually 10-20% of the loan amount
Usually 3-20% of the loan amount
Loan Terms
Flexible, but may require a balloon payment
Fixed or adjustable rate, 15-30 years
Property Type
Primary residence or investment properties
Primary residence, second home, or investment properties
Mortgage Insurance
Usually required for loans with a down payment of less than 20%
Usually required for loans with a down payment of less than 20%

Pros and Cons of Jumbo Loans vs Conventional Mortgages

Pros of Jumbo Loans

1. Higher loan amounts: Jumbo loans enable borrowers to buy a more expensive home or investment property that they might not otherwise be able to afford with a conventional mortgage.

2. More flexibility: Jumbo loans offer more flexibility in terms of loan structure, including interest-only payments, longer loan terms, and adjustable rates.

3. No mortgage insurance: Jumbo loans do not require mortgage insurance if the borrower makes a down payment of at least 20%.

Cons of Jumbo Loans

1. Higher interest rates: Jumbo loans typically carry higher interest rates than conventional mortgages due to the higher risk associated with the larger loan amount.

2. Stricter eligibility requirements: Jumbo loans have stricter eligibility criteria, such as higher credit scores and lower debt-to-income ratios, which can make them harder to qualify for.

3. Higher down payment: Jumbo loans usually require a higher down payment, which can be a significant financial burden on borrowers.

Pros of Conventional Mortgages

1. Lower interest rates: Conventional mortgages typically have lower interest rates than jumbo loans, making them an affordable option for borrowers.

2. More lenient eligibility requirements: Conventional mortgages have more lenient eligibility criteria, which makes them easier to qualify for than jumbo loans.

3. Lower down payment: Conventional mortgages usually have a lower down payment requirement, which can make it easier for borrowers to come up with the necessary funds.

Cons of Conventional Mortgages

1. Lower loan amounts: Conventional mortgages have a lower loan limit, which can limit the amount borrowers can borrow.

2. Less flexibility: Conventional mortgages have fewer options for loan structure than jumbo loans, meaning borrowers may have less control over their mortgage terms and payments.

3. Mortgage insurance: Conventional mortgages require mortgage insurance if the borrower makes a down payment of less than 20%, which can drive up the overall cost of the loan.


Q: What is the maximum amount you can borrow with a jumbo loan?

A: The maximum amount varies depending on the location of the property. In most areas, the limit is $548,250 as of 2021.

Q: Can I get a jumbo loan with bad credit?

A: It’s possible but difficult. Most lenders require a credit score of at least 700 for jumbo loans.

Q: What is the minimum down payment for a jumbo loan?

A: Usually 10-20% of the loan amount, but some lenders may require more.

Q: How long does it take to qualify for a jumbo loan?

A: Qualifying for a jumbo loan can take longer than a conventional mortgage because of the more stringent eligibility criteria and documentation requirements.

Q: Is a jumbo loan a good idea for investment properties?

A: Yes, jumbo loans can be a good option for investment properties because they offer more flexibility and higher borrowing limits than conventional mortgages.

Q: Can I refinance my jumbo loan?

A: Yes, you can refinance your jumbo loan, but you may have to pay higher fees and interest rates than you would with a conventional mortgage.

Q: What is the difference between a jumbo loan and a super jumbo loan?

A: A super jumbo loan is a type of jumbo loan that exceeds the maximum loan limit set by Fannie Mae and Freddie Mac, which is $548,250 in most areas of the United States.

Q: What is the minimum credit score required for a conventional mortgage?

A: The minimum credit score required for a conventional mortgage is usually 620, but some lenders may require a higher score.

Q: Can I get a conventional mortgage with a low down payment?

A: Yes, you can get a conventional mortgage with a down payment as low as 3%, but you will have to pay mortgage insurance.

Q: What is the difference between a fixed-rate and an adjustable-rate mortgage?

A: A fixed-rate mortgage has a fixed interest rate and monthly payment for the entire term of the loan, while an adjustable-rate mortgage has an interest rate that can fluctuate over time.

Q: Can I use a conventional mortgage for an investment property?

A: Yes, you can use a conventional mortgage to buy an investment property, but the eligibility requirements may be stricter, and you may need a higher down payment.

Q: How long does it take to get approved for a conventional mortgage?

A: Approval for a conventional mortgage can take anywhere from a few days to several weeks, depending on the lender’s requirements and the borrower’s eligibility.

Q: What is a jumbo mortgage refinance?

A: Jumbo mortgage refinance is the process of refinancing a jumbo loan to take advantage of lower interest rates or to modify the loan’s terms.

Conclusion: Choose Your Mortgage Wisely!

Now that you have learned about the differences between jumbo loan rates and conventional mortgages, it’s time to choose the one that suits your needs and financial situation best.

Remember, your mortgage is one of the most significant financial commitments of your life, so take your time and consider all the factors before making your decision. Whether you choose a jumbo loan or conventional mortgage, make sure you can afford the monthly payments and stay within your budget.

We hope this comprehensive guide has helped you understand the pros and cons of each type of loan and make an informed decision about which one is right for you. Good luck on your home-buying journey!

Closing or Disclaimer

The content of this article is intended for informational purposes only and should not be construed as professional financial or legal advice. Always consult with a qualified financial advisor or attorney before making any financial decisions. The author and publisher of this article do not assume any liability for any damages or losses that may arise from the use of this information.