How a jumbo loan works

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Rory Arnold
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Fact Checked

Contributed by Tom McLean

Updated Apr 19, 2026

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5-minute read

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A jumbo loan is a conventional mortgage that exceeds the conforming loan limits and is used to purchase more expensive homes. Because you're borrowing more, jumbo loans come with higher borrowing costs and stricter eligibility requirements compared with conforming loans. Jumbo loans often are manually underwritten, which means a human, rather than an algorithm, reviews your application and finances. Here’s a closer look at what jumbo loans are and how they work to help you determine if this might be the right mortgage option for you.

What is a jumbo loan and how is it different?

A jumbo mortgage is a conventional loan exceeding the conforming loan limit set by the Federal Housing Finance Agency. Jumbo loans are called non-conforming loans because they exceed these limits.

You’ll need a jumbo loan if you're buying a home where you're borrowing more than the conforming loan limit. For 2026, the conforming loan limit for a one-unit home is $832,750 in most counties across the United States, and $1,249,125 in high-cost housing markets, as well as Alaska, Hawaii, Guam, and the U.S. Virgin Islands. The FHFA posts a conforming loan limit map showing the limits for every county.

Lenders can sell conforming loans to government-sponsored enterprises like Fannie Mae and Freddie Mac, thereby reducing their risk. Jumbo loans cannot be sold to Fannie Mae and Freddie Mac, so lenders take on more risk and often set stricter eligibility requirements.

If you want to buy a home in one of the most expensive cities in the U.S., you may need a jumbo loan. In the current market, even modest homes require a jumbo mortgage in some areas. 

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Types of jumbo loans

Like most conforming conventional mortgages, jumbo loans are available with a variety of terms and repayment schedules, and they can be either fixed- or adjustable-rate loans.

Jumbo loans are usually privately issued, like conventional loans. The FHA offers high-balance loans, and qualifying veterans and military personnel can apply for a VA jumbo loan.

Rocket Mortgage offers the Jumbo Smart loan, available as a 15- or 30-year fixed-rate loan or an ARM with a 7-year fixed introductory rate followed by rate adjustments every 6 months.

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What are the requirements for jumbo loans?

As a non-conforming conventional loan, each lender is free to set its own requirements for a jumbo loan. Because lenders take on more risk with jumbo loans, the requirements are often stricter.

Here is what you can generally expect when applying.

Property types

Whether you are expanding your portfolio or building a custom retreat, you can use a jumbo loan to finance a wide variety of property types, including:

Down payment

Jumbo loans typically require a higher down payment than conforming loans.

You’ll typically need to make a down payment of at least 10%, though some lenders require 25% or 30%. The minimum down payment you'll need will also depend on your total loan amount and credit history.

Lenders also may require larger down payments for certain types of properties, such as second homes and multifamily units.

With Rocket Mortgage’s Jumbo Smart loan, you’ll need a down payment of at least 10%. To find out how much you’ll need to put down, speak with a Home Loan Expert who can help you prepare for your future purchase.

Credit score

Jumbo loans typically have stricter credit requirements than conforming loans. The exact credit score required for a jumbo mortgage varies by lender and loan terms.

With a Rocket Mortgage Jumbo Smart loan, you’ll need a credit score of at least 680, though this can vary up to 760 depending on the property type and interest rate type.

Debt-to-income ratio

Your debt-to-income ratio (DTI) measures how much of your monthly income goes toward paying your debts. It's important to have a low DTI ratio to qualify for a jumbo loan, as it shows lenders you can afford the mortgage payment.

You can calculate your DTI by adding up your monthly debt payments and dividing by your income before taxes. For example, if you pay $2,000 a month toward debts and you bring home $5,000 a month before taxes, your DTI ratio is 40%:

$2,000 / $5,000 = 0.4 or 40%

Some lenders require that your DTI not exceed 43% to be eligible for a jumbo loan.

For a Jumbo Smart loan from Rocket Mortgage, you'll need a DTI ratio of 50% or lower. If you have a higher down payment or credit score, you may qualify for a jumbo loan with a higher DTI ratio.

Consistent income

To prove that you have a steady income, lenders often ask to see your W-2s, tax documents, or 1099s for the past 2 years when you request a conventional loan. With a jumbo loan, your lender may require additional documentation and proof that your income is unlikely to change after you get the loan.

Cash reserves

Lenders need to know that you can afford the mortgage payment, even if there’s an interruption in income. You can expect lenders to ask you to provide bank statements to demonstrate that you have 6 - 30 months’ worth of expenses in reserve.

Here are the cash reserve minimums for a Jumbo Smart loan from Rocket Mortgage:

 Rocket Mortgage Jumbo Smart Loan Cash Reserves Minimum
 Loan amount  Cash reserves minimum
 $1 million or less  6 months
 $2,000,001-$2,500,000  12 months
 $2,500,001 - $3,000,000  18 months

Having cash in your bank account isn’t the only way to meet reserve requirements. At Rocket Mortgage, you may qualify using the full assets of your retirement account. In some cases, business and gift funds also may count toward your reserve requirements.

Closing costs

You can expect closing costs to total 3% - 6% of your loan amount. Because jumbo loans are larger, you can expect to pay more compared with conforming loans. For example, for a $900,000 mortgage, closing costs could range between $27,000 and $54,000.

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FAQ

Here are the answers to some common questions about jumbo loans.

Can I refinance a jumbo loan?

Yes, you can refinance a jumbo loan to secure a lower interest rate, change your loan term, or borrow your accumulated home equity. With a refinance, you replace your mortgage with a new loan with different terms. Just like when you initially bought the home, you will need to undergo the underwriting process and meet the lender's strict credit, income, and cash reserve requirements.

How much do I need to save for a jumbo loan’s down payment?

Most lenders require a down payment of at least 10% for a jumbo loan – though some require as much as 30%. The minimum down payment you’ll need will also depend on your credit profile, the loan amount, and the type of property you are purchasing. For instance, well-qualified buyers can secure a Jumbo Smart loan from Rocket Mortgage with as little as 10% down.

Do jumbo loans require PMI?

No, jumbo loans do not require private mortgage insurance (PMI). If you put less than 20% down on a conventional loan, you must purchase PMI to protect the lender. However, lenders often allow you to waive the PMI requirement on a jumbo loan, sometimes in exchange for a slightly higher interest rate or higher minimum credit score.

Is a jumbo loan harder to get?

Because jumbo loans are larger loans and have no government backing, they pose a greater risk for lenders. As a result, they have stricter eligibility requirements. To get approved, you may need a higher credit score, a lower DTI ratio, and more robust cash reserves than you would for a standard conventional loan.

Why would someone get a jumbo loan?

Borrowers use jumbo loans when they want to buy a more expensive home and need a mortgage that exceeds conventional conforming loan limits. A jumbo loan allows buyers to finance their home purchase with a single mortgage, rather than needing multiple smaller loans.

The bottom line: Jumbo loans make high-value home loans possible

If you want to buy a home in a high-priced market, you'll need a jumbo loan. Jumbo loans can be the mortgage option you need if you need a loan that exceeds the conforming loan limits in your area. However, you can expect stricter eligibility requirements and higher borrowing costs. You'll also need to make sure you can afford the higher monthly payment.

If you’re ready to get rolling, you can start your application for a Jumbo Smart loan today.

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Rory Arnold

Rory Arnold is a Los Angeles-based writer who has contributed to a variety of publications, including Quicken Loans, LowerMyBills, Ranker, Earth.com and JerseyDigs. He has also been quoted in The Atlantic. Rory received his Bachelor of Science in Media, Culture and Communication from New York University.