Conforming vs. jumbo mortgage loans

Determining whether a mortgage is a conforming or jumbo loan depends on the type of loan (FHA or conventional), the area’s conforming loan limit and the type of property. For example, a conventional loan limit for a single family home or condo in Santa Ana, California, is $636,150, yet in Chicago, the limit is $424,100. What’s the reason for this difference? Some more affluent counties have higher limits as a consequence of average home prices and land value being more costly.


Conforming or jumbo?

To determine if a loan is conforming or jumbo, you’ll need to know the lender: FHA or Fannie Mae/Freddie Mac? FHA and Fannie Mae/Freddie Mac have different loan limits depending on where you live, so you’ll need to use the proper resources when doing research.

FHA loan limits. Simply enter your state and county and hit send at the bottom of the screen. You’ll be given the loan limits for your county along with the loan limits for each property type within.

Fannie Mae/Freddie Mac loan limits. While this is Fannie Mae’s site, both Fannie Mae and Freddie Mac rarely move independently of one another. The charts offer the loan limits for each property type but do not provide detailed information regarding high-cost counties.

Conforming and jumbo loan underwriting differences

Conforming lending rules are more flexible than jumbo, from the required credit score to the down payment. Jumbo lending guidelines are more stringent, and with good reason—lenders are taking more risk. In general, when more money is being financed, borrowers need to put more money down and have higher credit scores.


Conforming programs and rates. Conforming loans offer more competitive rates and offer both adjustable rate mortgages (ARMs) and fixed rate products.

Conforming credit. All lenders are different, but typically a minimum credit score of 620 is required.

Conforming income. All types of income can be used when qualifying for a conforming loan. Speak with your mortgage professional if you have questions about your earned income.

Conforming assets. The lender will want to see two to three months savings (reserves). One month’s reserve is the equivalent to one full month’s mortgage payment (principle, interest, taxes and insurance).

Conforming debt. The lenders use debt-to-income ratios to qualify you. Conforming guidelines are more flexible and you can be approved above the suggested debt-to-income ratio. Just keep in mind, your gross income is used when determining whether or not you qualify so be sure you are comfortable with your monthly payment.

Conforming property appraisal. Only one appraisal is required.


Jumbo programs and rates. The rates for jumbo loans are less competitive than conforming loans. Additionally, ARMs are popular in the jumbo arena. While fixed rates are offered, the rates are significantly higher than those of conforming loans.

Jumbo credit. Again, all lenders are different, but usually you’ll need a minimum credit score of 700.

Jumbo income. Just as with conforming loans, all types of income can be used when qualifying for a jumbo loan.

Jumbo assets. In addition to the down payment and closing costs, a jumbo lender will want to see a minimum of twelve months reserves.

Jumbo debt. As with conforming loans, jumbo lenders use debt-to-income ratios for qualification purposes. Jumbo guidelines are not as flexible. For example, a conforming lender may approve your loan at a DTI of 45%; however, some jumbo lenders will limit you to 40% DTI.

Jumbo property appraisal. Depending on your loan amount, you may be required to pay for two appraisals.

When researching your financing options, be sure and talk with your mortgage professional regarding all of the available loan products and programs.

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