What are jumbo loans and how do they work?

A jumbo loan is a mortgage that exceeds the loan limits for conventional conforming loans. Because jumbo loans are for larger amounts, they tend to come with higher borrowing costs compared with conforming loans. 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?

A jumbo mortgage exceeds loan limits the Federal Housing Finance Agency sets for conforming conventional loans. Jumbo loans are called non-conforming loans because they do not conform to these limits.

For 2025, the conforming loan limit for a one-unit home is $806,500 in most parts of the country and $1,209,750 in high-cost areas, Alaska, Hawaii, Guam, and the U.S. Virgin Islands. You’ll need a jumbo loan to borrow more than the limit in the county where you’re buying a home. To find the conforming limits where you’re looking to buy a home, check this FHFA map.

Lenders can’t sell jumbo mortgages to Fannie Mae or Freddie Mac, which means they take all the risk in issuing a jumbo loan. You’ll typically need to meet stricter eligibility requirements. The interest rate you’re offered on a jumbo loan usually is competitive when compared with conforming loans but also may be a bit higher to compensate the lender for the increased risk it’s taking.

If you want to buy a home in one of the most expensive cities in the U.S., you’ll probably need a jumbo loan. In the current market, even modest homes require a jumbo mortgage in some areas. Because of this demand, lenders are becoming more comfortable offering jumbo mortgages.

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

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

How do jumbo loans work?

Conventional mortgages are originated by lenders, which can sell conforming loans to Fannie Mae or Freddie Mac. Fannie and Freddie can’t buy jumbo loans, so lenders keep them on their books and take all the risk in making the loan.

Jumbo loans often are manually underwritten. This means a human financial expert reviews your credit report, assets, and bank statements to determine whether you can afford the mortgage you’ve applied for. If you have a bankruptcy or foreclosure on your report, you’ll have a harder time getting a jumbo loan.

Having cash in your bank account isn’t the only way to meet reserve requirements, however. You may qualify using the full assets of your retirement account at Rocket Mortgage, so you don’t need to cash out all of your funds to meet the reserve rule. In some cases, business and gift funds may also go toward your reserve requirements.

Higher closing costs

Closing costs are typically a percentage of your loan amount. Because jumbo loans are larger, you can expect to pay more compared with conforming loans. You can expect closing costs to total 3% - 6% of your loan amount. On a $900,000 mortgage, that’s $27,000 - $54,000 in cash at the closing table.

Consistent income

Lenders only offer jumbo loans to buyers with predictable and regular income. Lenders often ask to see up to 2 or more years’ worth of W-2s, tax documents, and 1099s when you request a conventional loan. With a jumbo loan, your lender may ask for more documentation and proof that your income is unlikely to change after you get the loan.

Is a jumbo loan right for me?

The best candidates for a jumbo loan are those with good credit, manageable debt, and enough income to afford a higher mortgage payment. You’ll also need enough cash saved up to make a larger down payment and cover your closing costs.

Other types of mortgages, such as conforming loans and government-backed loans, may have more flexible eligibility requirements. However, you won’t be able to borrow as much with those types of loans. This can limit both the selection of houses you’d be able to buy and the areas where you can afford to become a homeowner.

FAQ

To help you learn more about jumbo loans, we’ve compiled the answers to some of the most frequently asked questions about this type of mortgage.

Does the VA offer jumbo loans?

The VA offers jumbo loans to qualifying military personnel, veterans, and their surviving spouses. No down payment is required. To be eligible, you’ll typically need a credit score of at least 620.

How can I get the best jumbo mortgage rates? 

If you want to make sure you get the best interest rate on your jumbo loan, improve your financial profile. Boost your credit score by paying bills on time and reducing your outstanding balances. When it’s time to choose a lender, be sure to get quotes from a few different lenders so you can choose the loan offer with the lowest interest rate. A good interest rate on a jumbo loan can also come down to timing, as current economic conditions will affect the interest rate you’re able to get.

How can I find out the jumbo mortgage limits? 

Conforming loan limits are set by the FHFA and vary depending on the county where you’re looking to buy. Jumbo loan limits vary based on the lender. The Jumbo Smart loan from Rocket Mortgage is available for amounts up to $3 million.

How can I apply for a jumbo loan? 

The process of applying for a jumbo loan is similar to other types of mortgages. You’ll start by choosing a lender and getting preapproved. Be sure to shop around and get quotes from a few different lenders to make sure you’re getting the best terms you can. It’s also a good idea to look into jumbo loan rates so you know what competitive interest rates are looking like in the current market. Once you’re preapproved, you can start house hunting. After you’ve found the home you want to buy, your lender will conduct the underwriting process to verify your finances before issuing final approval on your jumbo loan.