What is a jumbo loan?
A jumbo loan is a mortgage loan that exceeds the limits set by the Federal Housing Finance Agency.
The maximum amount for a conforming loan is $647,200 for a single-family home in all states except Hawaii and Alaska where the limit is $970,800.
Conforming loans and non-conforming loans
The difference between a conforming and non-conforming loan is the loan amount.
To get a conforming loan, you’ll have to shop for houses that are in a specific price range so that they stay under the price limit of $647,200.
The down payment requirement for a conforming loan is way less than that of a non-conforming loan. Jumbo loan lenders require a minimum down payment of at least 20% or more, have tighter credit qualifying criteria, and have higher mortgage interest rates. The national average 30-year fixed jumbo mortgage APR is 5.220%. The average 15- year fixed jumbo mortgage APR is 4.570%.
Most lenders offer conventional loans because there are no special eligibility requirements. You can qualify with a FICO score of 620, a down payment of 3%, a debt-to-income ratio that is lower than 43%, and much lower interest rates. The national average 30- year fixed rate mortgage is 4.5%. The average 15- year conventional loan is 3.875%. Conventional loans are the most common mortgages to buy or refinance a home. They make buying a home more affordable.